In general, if your business plan relies on the goodwill of another company and you provide little value to that company in return, you don't have a very good business plan.
Sure, you're right that developers should try to give as much benefit back to their platform provider as they derive from the platform. But the fact is that different companies perceive benefit in different ways with reasoning that is opaque. Often a decision can depend on a strategic direction for the firm that you are not privy to.
All this is why the reputation of the company matters so much. From reading the article, it looks like LinkedIn not only acted in a very inconsistent manner--giving praise before shutting them down--but they even began reverse-engineering the application. That's not the kind of behavior that breeds a healthy ecosystem regardless of whether they have all the right to act that way, and regardless of whether Pealk was careless in relying so heavily on LinkedIn.
If everyone were to take a cautious approach to the APIs and platforms that big companies offer, as has been suggested in this thread, then the tech sector would be a much less interesting place. The fact is that a lot of innovation happens because there actually are API and platform providers out there that care about their developers and won't pull shit like this.
So when you see:
http://talent.linkedin.com/Recruiter
And your site is using the API to create a service for recruiters, it seems crystal clear to me that you are violating the LinkedIn TOS. This is not some grey area or some arbitrary changing of the rules - it is a very clear violation of LinkedIn API guidelines. I just don't see how this proves even a little bit that LinkedIn doesn't "care about their developers".
And for the bigger picture, it is amazing to me that a significant number of people expect LinkedIn to sit around while some other company attempts to undercut LinkedIn's own premium product using LinkedIn's API.