Here's a case study to help Microsoft understand how to appropriately handle these kinds of situations:
Against their rules, a filmmaker snuck into the Magic kingdom and filmed a horror film on Disney property. Very subversive stuff, very much against the manufactured world of Disney. It's called Escape from Tomorrow. Everyone was prepping for a big legal fight, Disney trying to stop the release, etc. in fact, the distributor and filmmaker counted on it - controversy would drive up their sales!
So, how did Disney respond? They didn't. They ignored it. Completely. Utterly.
The film has faded into obscurity. Almost no one saw it, and few people have heard of it.
When you're a giant, attacking the little guy fails -- hard.
Proper MS response -- directly contact the guy, thank him for his kind words, offer him a year of Live and a copy of a game if he holds off reporting for a couple weeks. Explain that they really want to make a concerted marketing push, and his coverage dilutes it a bit. Ask for his help, don't make him the enemy. Friends are better.