Not as it sounds
When I read the original article of course I sided with the developer but having read more on this, it appears as (a) he was lying on his site (b) ElReg chose to lie on his behalf.
As some have already pointed out, this isn't a free product he's giving away, he's selling it. There's a big difference there. More importantly, as people have repeateadly asked... MS DOES block the plug-in API in Express. Jamie uses a hack to load his extension as if it's a custom object. I'm not sure if there is a technical measure that MS can put in place to limit the complexity of these objects, I very much doubt there is without further crippling the software. More importantly, the fact that he does something so extraordinary suggests to me, that he knew MS didn't want him doing it so he created a work-around.
I think it's reasonable for MS to put limits in free software, thousands of companies do it. They can provide feature limited software for free to the casual users while charging those who need the extra features for it. Sounds like a reasonable system to me.
If people read more into this, I think they'll agree that he intentionally broke his agreement. Lets save the MS bashing for when they deserve it (like when it takes hours to delete a few files!!!)