I'd be willing to bet that even someone with a "legal" collection has a track or two that may not be. Plus, there's the CD's I owned but lost, got scratched and disposed of, mp3's that were purchased from a now defunct site, mp3's that were purchased legally with drm, but have since had the drm removed (is that legal?), etc, etc.

Who could really "prove" that they had "legally" purchased each and every one of perhaps hundreds or thousands of digital music files? Not to mention the intimidation factor. If you choose to fight, and they can find even one illegitimate file, they'd press for the full fine ($150k per ?). IANAL, and don't know all the details (and I'm sure most folks don't either), so I have a choice between large legal fees, and a large fine, or pay the smaller amount they typically offer, or just don't take the chance at all, and keep my collection out of the cloud (at least until the risks have been better defined).

Ehh, just mere speculation anyway. I'm sure Google has considered all the legal ramifications they may face, so probably very little chance of that happening.