in this ie7 case I think I'd side with Microsoft. It is not a professional move by whoever set it up.
In the case of law suites however, it may be better to let this one go, at least for now. If they sue for the domain name, they may be contested for this one and a loss in court could set a precedent against them in future cases. It's a bit like what SCO tried to do with Linux: first pick on the people that will roll over, establish a precedent, then go after the bigger fish.