Oh, the brownies will be chortling over this today.
I have two thoughts here. One, you CAN tell the difference between computer generated images and real photos, when it comes to humans. Maybe in a few years the line will be blurred a bit we're just not there yet. If a child's actual picture or moving image was altered to put him or her into a sexual situation that did not exist in reality that child would be harmed, if only by reputation, so there is a difference.
Second, if the court had ruled for the ban I can see a situation where the makers of a serious film that depicted child abuse, say something along the lines of The Accused, or the episode last season of The Sopranos, that showed graphic rape scenes, would be hauled into jail on kiddie porn charges.