The reason for CandD was distribution of Google's own closed source apps like Google Maps, Google Talk and Gmail. They only supposed to be running on on Google Experience Android devices like the G1 and MyTouch 3G.
I don't think anyone has a problem with that. But Cyanogen mods only run on those same devices. Ha!
May be he (assuming Cyanogen is a he) can stop distributing those apps and everything should be alright!
But I guess the real reason is that carriers got alarmed that these people can change the phones (well what was that open source phone platform?) and make them the way that suits the users. So Google might be trying to stop a gamut of system modders that might be invading Android arena.
Well untill we get some solid answers, I will ask again, (well what was that open source phone platform?)
Android and Me Via Engadget (don't forget to read the discussion, you might learn something!)