Three issues here you should be aware of.
First, what they're yelling at you for isn't sharing copyrighted material. They're mad because your gnutella servent was probing a domain for possible connections. While your activity was innocent, this activity can also be the work of a hacker trying to find vulnerable systems to compromise. Therefore most ISP's explicitly forbid "scanning" of this nature.
Second, despite the bogus advice you've received, it *is* legal for an ISP to monitor your internet traffic. The courts are ruling fairly consistently that there is no reasonable expectation of privacy with regard to unencrypted internet communication.
Third, your ISP would be fairly hard pressed to prove you were sharing copyrighted material, and i doubt they independently try to find customers engaged in such behavior. This would require enormous resources on their part. They would have to log every packet of every customer, then reassemble those packets on the other end, *and* then deal with the encoding inserted by various softwares. Lots of disk space, lots of cpu time, lots of bandwidth, no noticable payoff.
However, a third party, say the record labels, *could* very easily call them up and say "we downloaded copyrighted material from this ip address and we demand you pull the plug!" They probably couldn't use legal means to force the ISP to unplug you, but if your TOS explicitly forbids such activities, your ISP could do it simply to maintain their image as "good net citizens," and in fact, many ISP's do just that.
All that said, you still have a problem. Your isp is ticked off because you're scanning domains for gnutella servers. That activity continues regardless of whether you're uploading, or simply downloading, material. So their complaint will be repeated unless you find a way to either convince them that your scans are innocent, or find a way to run your client without scanning entire domains for servents.
Good luck.