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I have seen (and encouraged) some country extensions to pull domains with child porn on them, or other types of sites that are in violation of their terms. Some of the country codes do not permit porn domains, and use of them for porn can get them pulled without warning.
I have not seen the GoDaddy agreement for a domain registration, and I do not know if they have anything in their terms which says they can do this. The only time I have ever seen a domain get pulled at all is during a dispute over copyright or whatever, and that only happens when things are all proven and done for.
GoDaddy might have just signed their own lives away... if I had anything over there, I would be getting it out of town as fast as possible (and moving it to domainnamesystems.com :-) )
Alex
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