If it was found that the kids did actually download the music, then they should pay for the music they had. Period. They should not be charged absurd numbers ($7500? please). They claimed to find hundreds of mp3s on her computer. Assume 1,000 songs and an average of 15 songs per $15 album, the appropriate fine should be 66 albums * $15, or $990.
The fact is, they did not push the music to anyone. The RIAA would claim that thousands of people may have downloaded the music, therefore the woman owes thousands. Again, they would have to prove that. Of course, the main problem is that the owners machine did not put the music on anyone else's machine. In fact, anyone that did receive the music from her machine was actually pulling it from her (that's how the protocol would work.. request oriented). So, she would be blameless if 10,000 people took the music from her. Just as blameless as the people that she got it from are for her 'crime'.
As for free mp3's, no... but I do think they should be less expensive then they currently are. This would be the motivation behind the p2p file networks. If CDs cost $2-5, people wouldn't even bother with p2p networks.
And no, I don't download mp3s. I stopped listening to the ramblings of minstrels in the mid 90s, both 'musicians' and hollywoord 'actors.'
Personally... I think a CD with 13 or so songs on it for 10 bucks isn't a bad price.
I do think that a person illegally downloading mp3's have to pay some sort of punitive damages. Maybe 7k is to much. Maybe not. But it can't be just you got caught so you have to pay for what you stole. That's my opinion.