Linking can be considered "dissemination" thanks to the DMCA, see http://www.chillingeffects.org/linking/faq.cgi#QID152
But to respond to OP, IANAL but I think that you might have folded too easily. But it's understandable that you probably want to avoid a lawsuit at any cost.
Also, you might want to check this out
http://www.chillingeffects.org/dmca512/faq.cgi#QID862
and google around for 'wrongful dmca takedowns'.
E.g. look at the bottom of https://www.google.com/search?q=rihanna+diamond+mp3
Basically, a provider needs to provide contact information for a designated agent for DMCA takedown notices. Had Luke done so, and complied with legal DMCA takedown requests (as well as counter-notifications), he could have continued operating his service; however, that may have become considerably more work than he wanted to put into running the service.
The DMCA gives you a "safe harbor" from accidental copyright infringement. But once you know it's copyrighted you have to take it down. AKA, the DMCA notice.
The DMCA won't protect you from knowingly linked to copyrighted material and waiting until someone sends a letter. That's how Megaupload is getting pwnd.
"Finally, the service provider must not have knowledge that the material or activity is infringing or of the fact that the infringing material exists on its network. [512(c)(1)(A)], [512(d)(1)(A)]. If it does discover such material before being contacted by the copyright owners, it is instructed to remove, or disable access to, the material itself. [512(c)(1)(A)(iii)], [512(d)(1)(C)]. "