Letter of Intent: Politically right, but ethically ?

What we are talking about here is not about a legal battle between two parties, but about a demi-legal instrument with two sides, Offer letter and Letter of Intent. And how a company can use it to secure its future talent pool, or trim them in crunch even before they are onboarded.

Response to the situations
1. Do you think "Cancelling the Job Offers" at IIT Mumbai would affect the "The Best Employer Brand Image" of these firms and thereby reduce their competitive advantage?

The brand image of a company is built by experiences. It is obvious that the incident of Infosys cancelling the job offers at IIT Mumbai did led to a bad experience for all the students rejected. It makes things worse considering IITs produce the best talents in the country and there is a huge stake on those students. So, I think this incident would take a toll on Infosys's brand image as The Best Employer. Atleast and not limited to the IITs.
While the company could not have avoided rejecting the candidates due to economic crunch ( after all everything is business), it should have tried sacrificing a little to keep the branch image intact. For such a huge debt free company like Infosys with so much cash reserve, it would have not been a daunting task to retain/include such a talented pool from IIT Mumbai. It would have definitely been a good return of investment.
I f the company was not in a position to take those students, it should have assessed the situation beforehand and avoided such an embarrassing situation.

2. Do you agree with Infosys Spokesperson's statement that Infosys had not really cancelled any job offers since what they had given to the students was only "Intent of Offer"?

While the need for "Intent of Offer" as a substitute of "Offer Letter" is debatable, it has been an industry accepted standard to go for the former while recruiting freshers from colleges, to safeguard their legal obligations. I agree with Infosys Spokesperson's statement. The students should have noticed clearly while accepting that it is not the "offer letter" but "intent to offer" letter. He is legally and politically right, may be ethically not very right. While most of the job haunting candidates in the current situation keep their options open by having more than one offers in hands at the same time, the organizations too have to maneuver through rough economic situations.

3. If you were the placement coordinator at IIT, Mumbai, what would you do to resolve the placement issues present in the above case?

As placement coordinator at IIT, I have to devise stern strategies to tackle this scenario
a. Start dialogue with Infy HR Head and leaders regarding this issue, explaining them future impact of their deed on Infy and IIT relationship.
b. Look out for alternates, give student some options, such as revisit salary structure that was promised, or take them in contractual basis. Atleast their interim needs will be satisfied by these options.

4. Have you or any of your friends gone through similar experience where the job offers or intent of offer has been cancelled by the prospective employer? If so, how did you or your friend handle the issue?

Not any of my friends, but my junior colleagues have gone through similar experience during 2008-2009 campus drives. They were issues letters of intent, when they were pursuing their 7th semester. Soon hit the recession, they were put on hold. Now (2010) when they are recalled after 2 years of their selection, they share their stories how did they spend this 2 years.
I find one group of candidates who were optimistic and anticipated a call-back any moment. So they took up teaching jobs in institutes and tutorials.
Other group had little faith in my company and its policies, so headed to market for look out for options with the intent of never return to this company even if recalled sometime.
There were the third category who opted for higher education, preparation for MS, GRE, MBA. They thought this is right time to strengthen their skills and go for higher degrees.