"The correct moves"? Hah. It's very easy to sit around armchair quarterbacking how you would run a site that gets about four orders of magnitude more traffic than the most successful thing you have ever created. (In fact, it appears to be something of a pastime among bored, underemployed web developers, cf. "You're Killing Me Zappos" or that one about the American Airlines web site.) I fail to see what authority you have to prescribe strategy to somebody who figured out a way to get 50 million unique visitors a month. Your assertions aside, there's not a shred of evidence that what you say is right, and that what Craig Newmark does is wrong.
I would hardly qualify as a bored, underemployed web developer, but I do believe there's a decent way to go about things. There is also some evidence that what Craig did was the wrong way to go about it.
1. Craig was having a discussion with Romy that was clearly misleading. The fact that there's been no further communication and pipes have been turned off demonstrates that.
2. All pipes were shut off. Even if you thought that Romy's pipe was commercial, some might not have been. Drowning everything might be easy, but it doesn't seem good.
3. He's on the board of the Wikimedia Foundation and the Sunlight Foundation. These are both great organizations that advocate for openness, transparency, and the sharing of data. These groups would despise an action like this.
Craig has a right to run his business the way he wants to. However, there's a odd level of hypocrisy here and it merits being pointed out.