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Keep the name and make money with the type in traffic. I have 5 .com's which get traffic because other people have registered .net and it' like a nice lazy man's traffic pump. Pure luck, I never cyberquatted nor did I think anyone would register the .net variations.
I have also been threatened by 3 separate idiots, one large European corporation and all 3 back down after our lawyer stepped up. Domain names don't always get taken away that easily espcially if you are sincerely not sybersquatting and there is any grey area. The funny thing is I would have sold the names each time but the initial contact from them was aggressive threats so fuck it, that put me off.If I was you I would just get something up on the domain so that it shows you are using it.
Stand your ground and if the band really wants the name they will come back with a better offer. Maybe you could also offer them a link to their site from your index for a monthly fee but I would be careful about contacting them too much about this hence it will look like you are cybersquatting.
Good luck and njoy the traffic!
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