I'm a university admin myself, and about a year ago I had an incident in which a student, without permission, installed the UNIX version of the software on one of the machines here. We had a chat about it, he was told not to do it again, and that was the end of it. But we're a private school, it was tying up only one CPU on a multi-cpu machine, and the individual who did it was a student rather than an employee.
One detail that hasn't been mentioned is that for a period distributed.net was giving out prizes for teams that were able to crunch more. So in addition to other considerations, this individual on our machines (and perhaps the guy in the article) was in violation of our "don't use university property for personal gain" rules. Most universities have such rules, and the rules tend to be more stringent for state-owned machines.
Distributed.net may or may not have worthy goals, but IMO it's up to the owners of the machines to decide whether or not they want to donate cycles to the cause and that's also stated on the distributed.net web site. Students pay tuition, I'm in charge of installing things on the machines and get them running, but that doesn't make any of us the owners. It's not a "get a PhD and take home an Ultra 10" deal, and there were no computers in my "10 year gift" catalogue.
The charges sound draconian to me, and I hope that the worst case scenario doesn't become the final result. But we haven't heard the university's side. This guy could be anything from a kid working part time in the computing facility to fund his education to a long-time loose cannon who ran out of chances.
BTW, for the individual in the Netherlands (?) who was asking about free speech -- the 1st amendment only gives you the right (with some qualifiers) to do what you want with your own printing press. It doesn't give you the right to appropriate the printing press of the guy down the road.