Firstly, it's a fair usage policy, not a hard limit. You don't get charged for over-use with a FUP. With my contract (which is with Orange), if I go over the FUP a little bit, nothing happens. If I take the piss then they will ask me to upgrade to a larger data package, or use less, or lose it.
Secondly, the "T-Mobile says no videos or downloads on your mobile" idea isn't entirely correct. If you hit the 500MB limit in a month, your internet continues to work on your phone! However, streaming video and other data heavy activities will not work once you are past the limit.
Lastly, it's really, really hard to use 3GB of data on a mobile phone. I have 3G watchdog installed on my Droid and the only time I've come close to 500MB is when I was tethering. 500MB doesn't sound like a lot these days, but on a mobile phone it really is plenty. My usage over the last 6 complete months is as follows: 295, 316, 388, 166, 407, 211 (all figures in megabytes) and I use my phone pretty heavily. YMMV of course.
However, I would understand anyone being upset by these changes. I hope Ofcom finds in the consumers' favour and the change is repealed, or people are allowed to get out of their contracts early with no penalty. The way T-Mobile has handled this, from the "announcement" (or lack thereof), to telling people what their smartphones are and aren't for, is a lesson in how not to do things.