And for all we know he had a picture of his newborn. Aren't you promoting the same hearsay?
you said:
I'm suprised how easily people swallow someone else's hearsay and then spray vomit it out as the truth.
and then you said:
Having followed a bunch of these types of stories on some other sites (webhostingtalk), 9 out of 10 times the "victim" is holding back so much details from the actual story that they might as well be lying.
You're contradicting yourself. You're stating hearsay (you had no direct contact with the issue of 9/10 lying people, you only heard it from webhostingtalk) and then purporting it to be true.
Regardless of whether the original author is telling the truth, it doesn't matter because that's not the point of the article. The point is that you may lose more than you know simply by being deemed a violator in the eyes of Microsoft, so it's buyer beware.
Relating to your comment: People are innocent until proven guilty in the US. If Microsoft found something that they deemed a code of conduct violation, then they can bring it up with the police or they can at least bring it up with the account owner. Maybe it was SkyDrive uploading more than he expected?