Screenshots are legal under the terms of "fair use" - you're allowed to use excerpts of any work for the sake of reviewing it.
In any case, even if the letter strikes fear into someone, it would be enough to pull down the downloads of the games which actually belong to IDSA members! They can't speak for any other copyright holders, so they can't do anything about anyone offering games made by anyone not on their member list
. In the case of a C64-related site, the games actually belonging to these companies should be very small.