I think this is just another example of the short-sightedness of the music industry. What better place to advertise a legal download service than in the very place that is doing it illegally? If each advertisement even gets 1 person that was previously unaware of the legal downloads to switch then the music industry has been served well.

To support the idea that advertising on these sites is harmful you would have to believe that people actually go to these sites to view the advertisements. Only 1p or so is made per click on an advertisement so the amount of revenue generated for a pirate site by a Napster ad would be negligable in the overall scheme of things since the people that know about legal downloads and choose to pirate anyway wouldn't bother clicking on the banners anyway.

My advise would be to advertise on as many pirate sites as you can if you want to reach the audience that you really want. Kill two birds with one stone, reduce the number of piraters and gain more legal customers at the same time.