I work for 35 civil/family/criminal specialist barristers - we deal with a few issues of copyright per month, I have therefore become fairly familiar with the Act.
I am not disputing the law, as I said in my previous comment - infringement, free or otherwise is in breach of copyright law in England and Wales.
What I do dispute is the differences in penalties that arise from such breaches.
You seem to claim that same penalties will be handed to the defendant regardless of whether the original was free or not. Acts are only guidelines for the judiciary to interpret (known as statutory interpretation) - what Acts do not cover is the range of other factors including circumstances, damage, mitigation and others
It is the role of the presiding judge(s) to go along with the law WHILST taking in to account these factors that are specific to a case. Judges give what is known as a "ratio decidendi" (the actual judgement) in accordance with an "obiter dicta" which are the reasons for their judgement - reasons which are specific to the case. Clearly someone reproducing Microsoft products for profit or otherwise would be given harsher penalties than someone graphically reproducing the free original as is the case herein.
I am not disputing the law, and in fact the cited Act has many other sections other than the single one you posted. The act is only a binding authority, which the judiciary interprets and concludes accordingly.
This whole discussion (which I think is good and healthy

:D) was sparked because a forum memeber claimed that copyright should be sought for the most extreme things - which frankly, is not the case as Rich also pointed out.