This is a very difficult problem and I just wanted to voice my opinion. As someone who has spent a fair amount of time writing and releasing music, there is no end game. Everyone knows you can't make money from the majority of music, and it's probably the same in this case.
My opinion is that LFS should make enough money to keep the master server running, i.e allow the game to be free for a month or so to eliminate a significant portion of this problem. There is no need to have illegal servers if you have the legal version, the users would appear online and you could control the problem more.
I understand what everyone is saying, but at some point you have to remember the art behind the idea and forget the money. There is no point in developing something for 10 years, be it LFS or music, if no one listens or uses the program. Everyone wants it to be successful, otherwise whats the point?
Just my opinion, I'm not in this situation so I can't judge. I enjoy LFS and will continue to enjoy it either way.