While we can't easily confirm the truth of what happened, we should be able to confirm if the quote from the SkyDrive ToS is accurate. If it is accurate, then it is worth pointing out to people.

I don't think that private file storage services should be snooping in what I'm storing. Their limitations to what I store should be limited to what's legal (they can have stricter limitations to what I share if they want), and they shouldn't be checking every file (even automatically) to see if it looks legal.

I tried to look for the ToS, but it seems that to see them I have to first get a LiveID and agree to the LiveID ToS, so I gave up at that point.