They only cancelled it to new people, everyone who still has a contract with them keeps it.
Yes, you are correct
"Dear Continuous Players, we set up this service ultimately to provide a fast, efficient and cost effective way to ensure that your experience with PlayStation 3 & PSP was as seamless and hassle free as possible. Unfortunately, some individuals have chosen to abuse this service and as a consequence we feel that we have no option but to suspend Continuous Play and postpone acceptance of new Continuous Play plans until further notice. We will of course honour existing customer's policies and look to amend the existing provision so that it is less vulnerable to exploitation. Sincere apologies
PlayStation Team"