The fake ID thing needs to be taken a lot more seriously. College (and some high school) kids act like it's all a big joke to buy and use these. They should be charged and prosecuted and serve prison time. Pass a law that denies federal loan subsidies to any student convicted of this crime, and denies federal funding of any kind to schools which don't promptly expel students convicted of buying, selling, or using fake IDs. Underage drinking is illegal, dangerous, and has turned most colleges (all of which are heavily taxpayer subsidized) into primarily social/recreational institutions rather than educational institutions. Controlling illegal immigration, terrorism, voting fraud, and identity theft are much more important than allowing underage drinking.
Lets just return the drinking age to 18 where it properly belongs.
I believe it's now a felony to fabricate any government-issued ID.
According to the video available at the above link the Secret Service is investigating and students may face Federal Charges if they do not turn in their IDs before Nov. 18th.
I don't necessarily agree with your proposed solution regarding all who use fake IDs. I think it should be taken on a case by case basis - if they are trying to buy alcohol, or get into a bar I say that's much less of a crime than using it to create a false identity. As for the organizer of this ring though - I would say he definitely deserves harsh punishment.
And, of course, is fueling a market for fake IDs that empowers the unethical and has other collateral dangers as well.
-Eric