Let's see what we can do to address these issues, 1) get a hosting company outside the US, and that is hardened and resilient enough to shrug off frivolous C&D letters. 2) get a PO BOX address, or just use a mail forwarding service outside California so you can make money on the affiliate program again. Just look at the grey area sites (Torrents) to see how it is done.
I see grey area sites that have had years of harsh and aggressive treatment. See, for examples, pirate bay (prison sentences etc); oink (years of legal stuff (http://torrentfreak.com/oink-admin-found-not-guilty-walks-fr...); demonoid shut down; and MegaUpload. (Whether these sites needed legal action is another discussion. I mention them here merely as evidence that it's not as easy as hosting something outside the US.)
Being outside the US does nothing to make a person immune to US laws and law enforcement.
The issue isn't law enforcement though. He wasn't breaking any laws. He was just being harassed. It costs money to defend against a million lawsuits, even if they all get thrown out of court. The site was basically DDoS'd via the legal system. He wasn't even riding a grey area.
But the point is not to put you outside of US law, but to make a harder target for frivolous claims. In this case, the site is legal, but was taken down because the hosting provider did not want to deal with the torrent of unfounded cease and desist letters.