http://247classifiedads.com, where I've posted part of the cease and desist notice so that my users can see why the site is down. I have over 300 comments on the site already, and everyone is clearly upset that Craigslist is going after us. I'm thinking about putting the site on a new domain. Can URL forwarding can be considered copyright infringement? In answer to your last question, courts have found that forwarding a URL or linking to a URL can be copyright infringement if the person creating the link knew or had reason to know that the link was for unauthorized copying and encouraged it. Even though we don't think you were threatened with copyright infringement -- Craigslist's standard cease and desist letter is based on a breach of the user agreement, not copyright infringement -- we still think the same principles of unauthorized behavior apply. So, If you dont want to get mail from Craigslist attorneys, avoid URL forwarding or linking to mirror sites.
The End User License. We're not sure how cases like yours will resolve in court but we believe Craigslist has a strong argument regarding enforcement of its end user license. Everyone who joins Craigslist is faced with the screen shown above before joining -- and by clicking "I Accept" you entered into an enforceable agreement (which Craigslist believes you breached). As you correctly point out, your situation is further weakened by the use of "Craigs" in your site name and domain name. Craigslist's attorneys don't like that because it implies an association or endorsement. We're sorry to report that you may have to rethink your business model.
PS. We've looked at similar Craigslist issues (and examined the end user license) in January and March 2012,