At the college I am assigned to, we restrict file-sharing traffic to a small portion of our 3Mbps Internet connection via a traffic shaping hardware/software solution. Of course, there have been modifications to programs like KaZaA, so that they can utilize SOCKS proxy tunneling and hide their usage in TCP port 80. Likewise, there have been improvements in the traffic shaping software, and it can now detect this type of usage.
File sharing has it's place. We approach it as usage that can adversely impacts Internet response time as a whole for our college, and shape traffic accordingly. It has worked amazingly well.