There is only one official stance of this forum, and it is that we cannot condone copyright infringement. If we are made aware of such an infringement, then we attempt to correct the situation within reason. Fractal Softworks definitely does not want to deal with legal headaches arising from mod authors who couldn't be bothered to ask for permission before reusing content.
To your questions. Mod authors are indeed expected to ask permission first. Could they be sued? It's definitely a possibility. I won't comment on the likelihood of such a suit succeeding, or the perceived financial damage to the original content owner, but there are a lot of factors. Whether you earn money or not does not matter (in the U.S.) with regards to rights violations. Copyright violation in and of itself doesn't distinguish between commercial and non-commercial. There are, however, licenses that do explicitly distinguish (such as some variants of the increasingly popular creative commons licenses).
I'm glad you took steps with regards to your mod.
As for Caelus, I am already in contact with the mod author with regards to the music.
EDIT: Upgradecap indeed has permission to use the content that is in Demo 4, and apparently in Demo 5 it will become a moot point regardless because they have their own dedicated audio guy making all the tracks for them.