Whether or not these pilots were incompetent or not, or whether those who are would have been weeded out during the oral exam is moot. I'm very glad that there are several layers of tests that pilots have to go through to prove high levels of knowledge and proficiency. It's proven to work very well and is part of what makes this industry so safe and reliable.
However, regardless of all of that, what these pilots did showed a great lack of integrity and maturity. Those aren't the kind of pilots I want to be sitting next to in the future, or flying in the same airspace as me.
What is and isn't acceptable as far as studying off of previous tests and other unofficial resources is up to the airline. I'm sure that PSA's cheating and academic dishonesty policy (there is one right? correct me if I'm wrong) was covered very clearly during the early stages of their training. As long as you're playing their game, you play by their rules.
And besides, why doesn't anyone want to earn anything these days?