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I'm really not trying to start a licensing flamewar here, but putting it up on a web page for players to download and run is definitely "redistribution", and the usage text in config.php as written prohibits this without MudMagic's prior written permission. What you tried to restrict and what you did restrict don't match.
I appreciate your comments on allowed usage here and on other forums, but they self-contradict -- you say free of charge and restrictions, and then you give restrictions. Additionally, not seeing these comments in the client distribution makes me unwilling to rely on them -- I doubt it meets any legal burden of proof.
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