Why? If he successfully defeats them in court, I don't see how the government would have an 'in' to monitor the site. If they settled, that's another story (especially if the settlement terms were not public).
The government doesn't have to monitor the site. Just the threat alone of confiscating servers so that regular users lose access to their data is enough. Dotcom can totally win this case, restore his service, and the government hits him again six months later over new infringements. That's a risk many will not take.
In my opinion this action has possibly ruined the future growth of cloud services. I've always been leery of using a third-party server you do not control and the government showing it has no problems shutting that server down, whether it has anything to do with you or not, is a serious problem to consider.
Plus, since hosting services will often put multiple websites on the same box then that's a potential problem to consider. One we've seen before.
What if this happened to Dropbox? What if this happened to Apple's iCloud? Sure, people will say that will never happen but history is full of people saying similar things.
