First off, again, I don't think anyone has a "right" to cybersquatting, so I don't feel too bad for you. You registered it, got threatened legally, decided to back down, and nobody is poorer for it (except for them when they hired that lawyer).
So it's not a terrible result. Had you agreed to give them any money, THAT would have been a terrible result.
I would have made up something else for that acronym (Belly Buster did a great job coming up with one) and claimed that was it. As far as the fact that you played the SHRPO, you could have insisted it was a coincidence. But I agree there's a good chance you would have lost that in court, as that would have been an odd coincidence (where as SHPRO, as I mentioned, wouldn't have been.)
If you had asked me for advice, I would have taken their demand for the return of the domain (and that only) as a sign of weakness, indicating that they aren't looking to sue you for damages, and therefore just want the domain. I would have approached them with some token offer for buying it, making up some bullshit how you were really going to use it for yourself for whatever, and are willing to give it up for this amount of money just to spare everyone the legal battle. If they refused, you would almost always be able to call them up and offer just to give up the domain, unless they spent extra money filing an actual lawsuit (which wouldn't happen too quickly, so you'd have a little time).
But again, I'm not a fan of cybersquatting because I think it's profiting unfairly from the work of others. In this case I was less outraged because Indian gaming is shady to begin with, just as I never felt bad for Full Tilt when Yebsite ripped them off. (I didn't know Full Tilt was stealing money at the time, but they had dealt with my dishonestly enough times to where I definitely felt they weren't salt-of-the-earth or worthy of sympathy.)