My sympathies are entirely on the side of the game's author. It's just an obscene image -- the "collateral damage" in this case is perfectly acceptable and imo fair because it damages the brands of the illegal hosters.
I think you'd probably agree that, say, overwriting every file on the end user's computer with a text file complaining about how the iframe-wielding website steals content would be an unacceptable thing for the author to do. But the only difference would be the degree of suffering inflicted on the innocent bystander.
If you think this image is acceptable to show to young kids, are there any images you think are unacceptable to show them?
Also the phrase "you think this image is acceptable to show to young kids" subtly alters my position in a disingenuous and (I think) intentional way. My position is not that you should "show young kids goatse" but that "a young kid seeing a flash of goatse isn't really a big deal". They might laugh, they might be a little grossed out, they might be curious why someone would do something so strange. I think the idea that they would be "harmed" or "traumatized" is pure adult projection.
I think there is a genuine change in meaning, coming from your use of the word "should":
>My position is not that you should "show young kids goatse
But that's not a word I used (or intended).
ETA: Agree on images of violence.
However as a gay nerd I'm not really interested in having children, so I'll just have to leave it up to the village.