First, I am not a lawyer, and you should probably consult one if you're worried.

Second, I would "cease and desist" running that service (as stated in the letter), be it a torrent proxy or whatever. It's possible for files you torrent to be traced to you (it's traceable at the ISP level.)

That settlement letter is very curious, although accessing it may constitute a form of receipt - and be somehow binding.

Talk to a lawyer. Also I'm sure others on the web have been hit with this sort of thing before.