This rule should be strictly enforced on public folders. On private folders Microsoft shouldn't even be looking. While you should not be allowed to store "bad" content, it shouldn't be enforced on private folders unless there is some from of legal request.
I don't understand why they think it should work any different. Skydrive should be a way to back up files. You cannot back up your files if someone is snooping on them or if your account is banned for accidentally including that risky photo of your wife in the back up folder...
But fine. Whatever. Microsoft want to make their service unusable. Why are they then banning the entire live account? Suspending people from XBOX live and prohibiting them from using app purchases? If they are suspending the account the account holder needs to be refunded. Why don't they just prohibit the account from using SkyDrive?
Microsoft have been getting better recently. On this though they seem to have completely lost the plot.