Laws are laws, and if you disagree with a law, work to get it overturned or changed.
But to argue that a prosecution of a law is bad because it might or could or may lead to someone thinking they might or could or possibly get someone prosecuted if they are bullied online and then kill themselves relies on a lot of "what-ifs" and assumptions.
Really? Do you really think there's this huge morass of online people just waiting for a verdict like this so they can go and say, "Wow, now all I have to do is get someone to impersonate someone else, get them to bully me on MySpace, and then make sure lots of people know about it, and then take my own life, and I'll get my revenge!"
Agree or disagree with TOSs, but they are there for a reason. And if you don't like the fact that if you violate one, you can face prosecution (or even criminal prosecution if your actions lead to someone's harm or death), well, that's your choice not to visit that site then. There are millions of websites, and the nice thing is, nobody's forcing anyone to visit a particular one.
Decisions like this one are not bad, nor are they likely to lead to some sort of strange epidemic of people who work hard to try and commit suicide while implicating someone else for causing it. They are reasonable interpretations of law and proper repercussions for people acting in an unlawful manner. And people who are suicidal aren't going to start changing their entire set of behaviors to conform to this decision, to try and implicate another person.