Yes, but that is a tradeoff that has been made in nearly every non-trivial investigation of organized crime in the history of investigation or crime. You can always get the people at the bottom first, but you let them roam free committing crimes for a time so that you can take down the entire entity.

The tradeoff ought to be evaluated on a case by case basis, of course. Because you are trading some small harm for the theoretical reduction in some greater harm. However, I think it's pretty clear that stopping actual child abuse is much more important than preventing the dissemination of child pornography.

1. Based on DOJ and Court rulings what the FBI did here was actual child abuse. The FBI abused children in the course of their investigation. The Official DOJ and US Supreme Court position is that any distribution, or viewing of child porn images is in fact child abuse. As such the FBI running the server is in fact child abuse.

2. Who were these mythical "kingpins" you believe the FBI was seeking, in every case publicly known about prosecution resulting from this operation is about simple possession of child pornography, Not production. From my understanding of the cases not a single child porn producer has been prosecuted, and I believe the FBI has stated most of the images are very old and previously known to the FBI or other agencies. That made that statement to attempt to curb some of the outrage. Given that however it contradics your reasoning for them to continue operating the server as they had already caught the largest "kingpin" the server owner. It would seem they worked backwards in this operations, they caught the top guy first then used the server to sweep up the "street level" or bottom level persons.