The threat of legal action shouldn't be what compels you to follow the license. The fact that it's the right thing to do should do so. Most people do follow the license for this reason; those who don't are generally considered persona non grata by the CircleMUD community. If you choose the less honorable path, don't expect the rest of us to be helpful, or for that matter friendly.
Fundamentally, I am not against commercial use of my software. The vast majority of software I write is under GPL, which does not restrict commercial applications per se. In fact, some of my software (tcpflow and emlog, at least) has been included in commercial products.
If I were writing a MUD from scratch (which I'm not), I would definitely not prohibit commercial use of the server. The Diku and CircleMUD licenses were written in a somewhat more innocent (and perhaps naive) time, when MUDs were almost all used by college students on their campus UNIX machines. In such a situation, the computing resources are free to the admins. Their time is, in essence, free. The CircleMUD license was an attempt to prevent what I viewed as an ``abuse'': some college kid taking the (free) code, running it on (free) resources, and raking in cash.
I think that old view of the world is now outdated. Running a MUD can be a major venture---it can require a lot of time, energy, and money. It's done by many people who do pay for resources. It's not unreasonable to expect someone to try to make a business of it, or to be compensated for their expenditures.
I frequently get asked the question ``can a bunch of players get together and buy a new server for us?'' As I said above, I think it depends on factors such as special treatment that is given to the donators. If it's just a friendly group of folks who want to donate the server because they love the game, that's most likely fine. On the other hand, if the donation is motivated by (or causes) advancement or other special treatment in the game, you might be running afoul of the license.
Players (not administrators) are allowed to sell characters or equipment, provided the following:
I struggled with this question for a long time. It's definitely a gray area, and potentially a slippery slope. On one hand, one could interpret this as violating the statement in the license ``you must not use CircleMUD to make money in any way or be otherwise compensated.'' On the other hand, when read in context, that statement really applies to administrators, and not players. The intent of that section of the license was to prevent an admin from extracting money from players in exchange for the right to play CircleMUD (see the question above, ``If you wrote a MUD from scratch today...''). The license never really considers the responsibilities that players have with respect to the license.
One might take a somewhat kinder interpretation of the license and consider the building up of a character to be a service rendered by one player to another. I like this latter view, despite being troubled by the potential loopholes that could be introduced by administrators giving special treatment to player characters which are later sold for money.