Well I suppose it comes down to first of all, noticing that it's happening and then prove that it's happening and then find out who's behind it. From what I understand (although I may be wrong) the way this is set up with an iframe is that any referrals seem to be coming from the correct domain. So the aff program might not notice anything strange even if they were looking for it. The people who own the websites are oblivious because their main site hasn't been hacked. So that leaves it up to other affiliates who are checking their SERPS and find it.
Then once someone finds it they need to find someone who will listen - there was someone trying to do something about this over a year ago, and at GPWA someone else commented that when they said something 6 months ago nobody cared. I mean, sure it's possible that those websites allowed someone to place a page on their site.
But really, who do you go to or who do you tell? Especially since the only people who seem to care are other affiliates, so any complaining sounds like sour grapes or whatever. The guy who started this time was stubborn though, and didn't give up until someone started listening.
Who knows though if it will change anything. No matter if some aff programs dump this person temporarily, there will still be others who won't care about their methods. Complaints were made to Google and the ISP and none of that seemed to do anything.
I personally am not really outraged at what he's done - TBH I have to admire the guy a bit for exploiting the system so well for so long. Maybe that's because my site isn't really my main source of income like with other affiliates though. Of course what he's done is probably criminal and of course it's unethical, but really - he's not defacing the main sites of any of those sites who have his page, so they're not (technically) getting hurt. He's bringing in business so the casinos aren't hurt. He's hurting other affiliates though by filling the first 10 pages of Google with his links and that's a problem - also maybe if this doesn't get nipped in the bud, I can see where people are going to start thinking,
"Hey, if this guy can get away with it, why shouldn't I do something like that too?" and then it will just be a free-for-all where everyone loses.