Gah. I am so sorry you went though this Eta. I had a similar situation a few months back. Like you my products are heavily scripted (though not so heavily textured) so the damage to my business was light. But I was an emotional wreck for days (and would have been lost without my friends here on
SLU).
I think your attitude is great. I don't think there is a lot we can do about this type of copying. It has become ubiquitous. In my case it was a thirteen-year-old boy from Denmark. I was able to convince him that was he was doing was wrong, and even took him under my wing a bit. Unfortunately, keeping him out of Second Life is virtually impossible. All I can do is hope my influence has helped him understand right from wrong a little bit.