None of your points counter mine.
1) The unique ID and encryption scheme also exist for SECURITY.
Yeah, so? We aren't talking about modders or the running of compromised code here. We are talking about a duplicated license, and what the right response is. Blocking just that game, as I proposed, is a much more reasonable response than denying a person access to all their digital purchases which Nintendo knows for a fact they purchased.
2) Online cheating ruins gaming for everybody.
We aren't talking about online cheating. That is utterly irrelevant.
3) You MUST block risky code.
In this case, there was no risky code. Nintendo did not detect anything of the sort. There was a duplicated license and, in this case, the punished user is the one who held the legit license. This point has no relevance at all.
4) There is no business if everybody just copies it.
My proposal of just block the copy (and not the entire account) resolves this completely, without over-punishing innocent users. Furthermore, there is precisely zero evidence that "everyone will just copy it." The evidence is exactly the opposite in fact: popular games make a fortune even if people can (and do) copy them. So your implied hypothesis that "everyone" will copy it is false and refuted by data.
5) Nintendo tried to create virtual game sharing
So what? This feature was not involved in this case and its existence has no bearing on the over-severity of this punishment, for unproven guilt.
Google is free to shutdown your whole life and delete everything permanently
Only for the unpaid online services. Paying customers get better support. In this case, we are talking about legit purchased hardware plus a legit purchased physical game cartridge. This is a complete apples-to-oranges false equivalence. And in any event, Google's penchant for shutting people out of their digital lives without fair trial is precisely why I don't use Google's free services, nor should anyone else for anything important.
Your pure speculation bears no relevance on this issue.
Just because they do not (unless you are a falsely accused pedophile) does not mean it will not happen
Which does not make it ok. US law was written to prevent "guilty until proven innocent" behavior for very good reasons, and all of those reasons apply here too. The reasons you gave do not.