They're not really a host, you don't give them any files to use or to host for you, you merely switch your DNS settings and they cache your content.

This argument wouldn't hold up if copyright infringement were involved. Why should it hold up in this case?

I'm undecided.

Depends what country your from really whether or not that would hold up. Depends if the US is going to user the overreaching arm to sort things like this out.

They cache static content like images and host that, yes, but they do not host any dynamic pages or "websites" themselves.

They have some hosting capabilities but I think that would be better described as a "mirror" rather than a host. Most of their infrastructure is routing and some is mirroring/caching.

They do host a lot more material than for example The Pirate Bay, which only hosted metadata about the files (size, description, checksums).

The reasoning is very similar, "we don't care what our users do, we're infrastructure". I wonder how well that will hold up in court, once tested. I have a nagging suspicion they will have to change their stance, but I'm happy to be proven wrong.