The basic problem is autopilot bots. If you don't have rigorous protection all the way down to the operating system, it's not particularly difficult to make a bot that will run Diablo 3 bosses for you. If Diablo 3 were merely a single-player game this wouldn't matter, but they have made the auction house and the game economy an integral part of progression in the later stages of the game.
Bots may not be as directly harmful to other players' experiences as instagibbing anyone that pops up on the hacker's screen, but anyone who can successfully run an autopilot bot is devaluing the game for everyone. There's a real and measurable difference in the accomplishments of farming and selling a rare item for $50 on the auction house and selling the same item with the same time investment for $5. Because Blizzard wants the time people spend playing Diablo 3 to have more worth, they must aggressively police any automated bot activity, which might mean hitting some false positives here and there.
Humans play something like 1 million hours a week at lvl 60 and people running bot's want them to also have good items to farm faster so it's not clear that bot's harm the economy as they would buy and sell just like a person who plays a lot. Assuming bots gather both cash and items the only possible issue is they are a larger drain on blizzards servers, but I have a hard time believing it's that significant as the player base has already been cut in half.
The end game is not all that fun so it's been losing 10% of it's population a week. Granted, there is no subscription costs so you can come back at any time.
I see your point but don't agree with the method. The protocol is known and can be decoded. If they protect the client, it will just result in better standalone bots. Actually it will make them available quicker and in better quality if the client hacking is possible.
Bots may not be as directly harmful to other players' experiences as instagibbing anyone that pops up on the hacker's screen, but anyone who can successfully run an autopilot bot is devaluing the game for everyone. There's a real and measurable difference in the accomplishments of farming and selling a rare item for $50 on the auction house and selling the same item with the same time investment for $5. Because Blizzard wants the time people spend playing Diablo 3 to have more worth, they must aggressively police any automated bot activity, which might mean hitting some false positives here and there.