Aren't there plenty of sexual terms that are already "censored" in the instant suggestions database? That hasn't affected anything so I doubt this will have any large scale impact on file sharing.
It's one thing for them to refrain from auto-completing the users' first few letters with suggestions including the filthiest words in the language. That's quite understandable to me. After all, it seems unlikely that those results are what users ordinarily want and there is a very high attentional cost to offering them wrongly (from the UI perspective).
But in this case, they're filtering out perfectly ordinary words for perfectly legitimate network protocols and actual products. If I type "utorren" there's no reason Google should withhold the "t" other that pure evil search-term engineering.
It's incomprehensible to me that a company that refused to filter "democracy" in China will agree to demote "utorrent" in America.
But how can not returning search suggestions that the user in all probability actually wants be in their corporate interest? How could this do anything but detract from the #1 value Google has: the quality of their search?
What miniscule gain in the reduction of uTorrent users or the temporary appeasement of RIAA/MPAA demands could this possibly be worth the debasing of their brand image?