This seems to be a matter of confusion over the rules more than anything (though it sounds like there were some clear cut cases as well). After all, it sounds like they were able to use everything but each other for the exams, which seems like an atrocious way to prepare students for the "real world".
So how do you suggest they test students personally, without assholes taking advantage of the nice students who do all the work?
If that was their intention, why did they allow open book, open internet, etc? Far better would be in-class timed tests and essays.
EDIT: Well, there is also merit to the approach they used, so perhaps they just should have been far more explicit about what collaboration is OK and what isn't. Come to think of it, I'm not quite sure where to draw the line myself, so I just err on the side of caution and don't discuss anything that could be graded until after deadlines have passed.