Not a good idea. I live in Germany and have already asked a couple of lawyers in this area and they say ignoring it is the worst thing you can do - they'll just come back again and again, raising the fine with each letter until I have to appear in court.
Ignore it.
[*]Gotten a solicitor to get a court order for the ISP to disclose exactly who was assigned the IP address at the specific time. (remember there are only a few major ISPs in the UK, so it would be very easy.)
I don't have bittorrent. Never have had it. I have used things like Kazaa (back in the day) and more recently utorrent, but never used bittorrent. Also the film in question isn't even out on DVD yet as far as I'm aware. It's called Parker and it was apparently at the cinema (at least here in Germany) not long ago. Like I said, I had never heard of it before this letter came.
2) Films are/can be available on torrents before they are released.