I'm not entirely sure what Splunk has done wrong here?
On a free license you can index up to 500mb a day, if you blow this its alright. Splunk will let you blow this limit three times within a 30 day rolling window. That means that if on day 1 you use 600 meg you have a violation, if 29 days later you have a second violation then the window resets and you have 2 violations and need to have none for 30 more days to clear them.
If you exceed 3 then you lose the ability to search.
That seems somewhat fair to me? Its Splunk allowing room for people to sometimes blow the limit or run batch jobs, if you always go over then its an indication that you need a bigger license. Also you don't need to dump and reindex, this won't affect the license.
Best fix is to backup your buckets and reinstall Splunk, move the buckets back over and carry on as usual.
So in short, Splunk would have given you three warnings and as you've pasted above, you used 818% of your quota..... Also Splunk hasn't made anything more restrictive, its the same free license that was there a version or two ago.
EDIT: Just double checked, the Splunk free model hasn't changed since 4.1 (Which is also when it was introduced)
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