I think the case will end up being settled out of court as you say, but I remember noting at the time that by taking over Xstreet, LL had automatically removed any safe harbour status that it might have had for anything sold on Xstreet. The DMCA explicitly says that the OSP must "not receive a financial benefit directly attributable to the infringing activity" in order to qualify, and they now do by commission.

Given that

(a) there is a vast amount of potentially infringing content out there;
(b) LL does not vet products before they appear on Xstreet at all;
(c) LL does not really vet them afterwards apparently;
(d) some people really will sue anybody for anything, despite the fact that so far they haven't very much, possibly because LL _could_ claim safe harbour status and suing residents isn't worth very much money;

I wondered back then what the plan was to deal with this sort of situation, and I still wonder. Of course, there _was_ a plan, I'm sure. Anything else would be inconceivable.