The argument they will presumably make is that their system is a deduplicating file storage system. That one instance is infringing does NOT automatically mean another instance is infringing. For example, assuming the court agrees that personal backup copies can legally be kept, deleting the actual file instead of the links could delete legitimate backup copies. See the number of artists that were features as claiming to use Megaupload in their ads, for example...
Even other public links might be legitimate, and Megaupload would not have a way of determining that based merely on the presence of links.
Do I think they were aware that there were tons of illegal copies? Absolutely. But whether or not they could blanket delete content without in effect deleting content the people filing the DMCA takedown requests had no rights to request taken down is an entirely different matter.
