As a data point - is it possible in AdWords to exclude 'Adsense for Domains'? I didn't see anything like it in a quick look around, but there are a lot of settings. I'm guessing it's there somewhere. Is it on by default? Off by default? (I really don't know; it's not a rhetorical question, but it would be germane to the discussion)
The thing that gets people's sympathy is that Google set up a system to do exactly what he wanted to do a few days later. Couldn't they have struck a deal?
Maybe they could have if he hadn't been such a jerk about it. Note that I'm just going by what he wrote in the article directly linked, I didn't think it worth the time going back through his earlier articles, since the last one HE wrote about it made himself look a bit of a jerk.
The thing that gets people's sympathy is that Google set up a system to do exactly what he wanted to do a few days later. Couldn't they have struck a deal?