You're underestimating how different our cultures are.
Japan doesn't take copyright law very seriously. They allow people to create derivative works and even sell it at conventions (Doujinshi, anyone?). Hell, Lupin the Third--one of Japan's longest-running franchises--is a walking CASE of copyright infringement, and this was why early attempts to export the character had to change his name.
And as has been stated, America is a very litigitious country. We try to sue restaurants for selling coffee hot, for chrissakes.
That being said, this so-called "music issue" sounds like B.S. to me too, and some comments I've heard/read from Nintendo regarding Earthbound make me concur with you--Nintendo just hates Earthbound and wants to bury it.