Do you realize how much those damages could be? Copyright violations have multiple tiers of damage that add up quite fast; the actual loss of sales is considered, and statutory damages sit atop that and can run into incredibly large sums for willful infringement.

It could be considered by the court to be an ongoing willful violation with fines assessed on a daily basis, per copy, if Amazon could stop the violations and didn't. It's extremely dangerous to go into a copyright case without having done everything you can to alleviate the damage to the copyright holder, because fines could be accruing throughout the trial.

Amazon could potentially have negotiated a deal with the copyright holder, but if they weren't in a negotiating mood, then there really wouldn't be much to be done other than fix the violation to the best of their ability. The fact that the system has mechanisms for removal of purchased books is probably something potential Kindle buyers should consider.

Yes. That Amazon chose to break the Kindle platform to the extent that they can't cease infringing by merely pulling the book from sale is their problem.