1. The court who handed down the injunction is the arbiter for copyright law
Agreed so far.
2. The cache-only service is the means of enforcing the injunction.
Nope. The cache-only service isn't the one being enjoined. The party being enjoined is ISP A (the users' ISP). However, they aren't in a position to actually do anything about the injunction because they aren't ISP B (the Pirate Bay mirror's ISP). Their only way of "handling" it is to block the site in a manner that directly harms the business of CDN C (CloudFlare) and hundreds of other innocent businesses. CloudFlare, in turn, is also not capable of truly enforcing the injunction, because the Pirate Bay website mirror can trivially switch off CloudFlare with a simple DNS change and avoid any block that CloudFlare might put up.
The sole plausibly effective means of enforcement is for the courts to order CloudFlare to disclose the source IP for the website, and to then get an injunction against the correct ISP. And if that ISP turns out to be outside the UK, then it is likely beyond the reach of UK law, and that's a reality that the UK government will simply have to accept.
3. If you go to the other end of the spectrum and follow the lowest level of law the copyright is dead on the internet.
The reality is that there will always be sites on the Internet in countries that have weak laws. Any government that thinks it can somehow put up road blocks that will adequately prevent people from accessing those sites is a government of fools. Just take a look at how many people pay for VPN service to get around geo-blocking of TV shows, or to avoid censorship by oppressive governments.
As John Gilmore put it, "The Net interprets censorship as damage and routes around it." That's the way it has always been, and practically speaking, that's the way it always will be.
For this reason, if you want to fight piracy, you cannot hope to do so using technical measures. It never worked before, yet in spite of more than thirty years of trying to do so and failing (think Macrovision, floppy disk copy protection, etc.), corporations keep trying to make it work, and idiotic governments keep trying to find ways to legislatively turn this hopeless cause into something that's magically feasible. You know what they say about insanity?
Mind you, I don't have the right answer; if I did, I'd be rich. But I do know how to spot the wrong answers.
4. The cache only service could segregate the different sources to different IPs so different countries could enforce their own laws by blocking selected content.
First, there are only so many IP addresses. They can't realistically cache each site on its own IP address. The cost would be astronomical. Second, even if they could, how can you do that without also making it easier for oppressive regimes to suppress information? Ethically and morally speaking, a CDN must be content-neutral. There's simply no acceptable alternative.