....and where does it stop, will they sue the hardware makers and software companies because digital porn can be created using their products, the ISP's that by their very existence facilitate its transmission, the power companies that give the whole thing life......?

It is a bit like suing an arms/munitions manufacturer because someone shoots someone using one of their bullets that they bought, or a artists materials supply company because someone paints an obscene or illegal image with their product.

I know such things are much more likely to happen in the USA, but it reaches the point of ridicule. At what point does personal responsibility kick in?

What someone might do with your product is not a good argument for not producing. If that were the case cars would all have a 30mph max speed capability, alcohol prohabition would be in place and the legal profession would be banned and classified as a terrorist organisation because of it being detremental to everyone's health!

Daz have no real argument on this one.