Of course, as Google Blogoscoped notices, once you start employing this kind of technology, it's much easier to start using it for other purposes. Furthermore, Germany already blocks certain other types of content, like Holocaust denial related materials. Will they leave it at strictly illegal materials, or will they use it for other purposes? History teaches us that governments always tend to hide certain information from the people they govern.
On the other hand, Financial Times reports that the UK plans to force ISPs to start collecting data on copyright infringers, making it easier for copyright holders to sue them.
As always, this kind of action raises serious privacy and fairness issues. To quote FT, the ISPs will have to collect data "on serious and repeated infringers of copyright law." Ok, who decides what "serious" and "repeated" means? The ISPs? That can't be good.
And even if they precisely define these categories, this is one of those weird cases where the law isn't black and white. If you steal something from a shop, you don't have to do it "seriously" or "repeatedly" for it to warrant a punishment. But if you share some copyrighted tunes on the net, you're in the gray zone, and your Internet Service Provider - definitely not an institution designed to uphold the law - will decide if you're a thief or not.