I see avatars move quickly, fly, and jump long distances. It is annoying when I run for a crystal but a cheater rushes in and steals it. There are so many cheaters that I do not report them. There are simply WAY too many. When a cheater is identified and expelled by Linden Lab, the cheater just creates new avatar. This is why so many cheaters use default system avatars and have predictable names. Sigh. I admire the knowledge and skill needed to devise ways to cheat, but it is very demoralizing to those of us who play by the rules. I suspect that Linden Lab could easily avoid cheaters by blocking certain scripts and external HUDs, but they are unlikely to expel cheaters because all money redeemed goes back into SL, to creators or landlords, etc and supports Second Life economy.
My fear is that Second Life Marketplace or in-world stores can be used to launder money won by cheating. Imagine a smart creator has a store, then creates many avatars that cheat and use the money to purchase items from their own store. This makes the store look popular, and the Linden Dollars won by cheating can then be translated into Real Life money by shop owner. This becomes a liability to Linden Lab rather than a benefit to virtual economy, and to me this is reason enough to clamp down on cheaters.