What if it wasn’t a silver star per se but some medal that looked like one, maybe a foreign medal, is he in violation of the law?
As I understand the act (without going back and looking at the text) he's fine. I understand your point about enforcing existing fraud laws, but here's where I see a difference. US military awards and decorations are bestowed upon individuals in recognition of their individual service to the nation. In some cases the award may be of very direct and tangible value...i.e. a job application, where misrepresenting one's military awards would be tantamount to to misrepresenting academic degrees.
Above and beyond that, a service award is symbolic of the nation's gratitude and a recognition that the individual is entitled to a degree of that, albeit a non-tangible or unquantifiable entity. To allow others to partake in that credit without merit undermines the value to the one who earned, and "victimizes" the nation at large by lowering the value of gratitude or recognition. By enforcing against the misrepresentation, the level of esteem concomitant to the award is preserved.