She would have definitely had to do that, and probably she would have had enough monetary damages levied to bankrupt her. It's not reasonable to fault EFF for pursuing her best interests.
> It's not reasonable to fault EFF for pursuing her best interests.
That depends on whether you think the EFF's goal is more to protect the general well-being of Kate Wagner or to protect the idea that you can post pictures on the internet.
It's not reasonable to fault Kate Wagner for pursuing her own best interests, but what do those have to do with the EFF?
The EFF is representing her. They are doing so because they have a more general goal, but they're still legally and ethically bound to respect her interests.
I might suggest that representing her in conflict with their institutional mission is not a good use of the EFF's resources, and replaces a conflict of interest between the EFF and Kate Wagner with a conflict of interest between the EFF and its own supporters.
I suggest you try viewing this more as an activity of fundraising than pushing for their main goals. All non-profits funded by small donations have to do such things, and this had a pretty good side-effect as well.