Well, you have to understand the legal perspective of the host. Once they've caught you with the illegal files, they really have no choice but to deactivate the account - permanently. If they reinstate and anything else is later found, it is the host who could be held financially liable. So not only are they protecting themselves, they're protecting all the Dreamhost customers out there.
Now... It sounds like you may have learned a valuable lesson? You may not be able to apply what you've learned here, but there are many other hosting providers you can try out without making the same mistakes...
And jeez, be thankful no one wants to "make an example" out of your case. We've got people being fined close to $2 million dollars for sharing a few songs.
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