The saga of Universal Music's war on the Mega Song (a song and video recorded by several major artists in support of the online service MegaUpload, which Universal is trying to have censored in the USA through its support of the Stop Online Piracy Act) just got weirder. Many of us were baffled that Universal kept telling YouTube to take down this video, even though it was clear they didn't hold a copyright to it — a fact reinforced by artists like will.i.am, who insisted that he hadn't authorized Universal to send the takedown notice.
Now, a court filing in the matter from Universal claims that the takedown wasn't issued because Universal claims a copyright in the Mega Song, but rather, they claim that they have a private contract with Google giving them the power to take down videos they dislike, regardless of whether they are the rightsholder.
Your letter could be read to suggest that UMG's rights to use the YouTube "Content Management System" with respect to certain user-posted videos are limited to instances in which UMG asserts a claim that a user-posted video contains material that infringes a UMG copyright. As you know, UMG's rights in this regard are not limited to copyright infringement, as set forth more completely in the March 31, 2009 Video License Agreement for UGC Video Service Providers, including without limitation Paragraphs 1(b) and 1(g) thereof.
No one knows what Paragraphs 1(b) and (g) say (except Googlers and Universal), but the letter excerpted above implies that Universal has some sort of special deal to arbitrarily remove stuff it doesn't like from YouTube, even if that stuff is legal.