In fairly sure murali's action was investigated and verified as being proper. The umpire who kept on about it no longer stands.
I think you might mean the ICC cacked its pants, 'checked' his action, changed the rules retrospectively and then said there wasn't a problem. If it walks like a duck and quacks like a duck, it's a duck.
Which umpire by the way? Darryl Hair (who had a problem with Asian players in general and so was rightly edged out) or Ross Emerson, the umpire who called Murali for chucking because that's what he thought from square leg? Leading to Arjuna Ranatunga holding a gun to the head of the ICC by threatening to take his bat and ball and go home. Which then led to Emerson being hounded out of the higher echelons of umpiring for exposing the 'holy cow'. Very much in the way David Constant was with the Pakistan team from 92.
This is an area where the ICC have let the promise of a 'crowd spectacle' override the basic laws of the game. Dishonourable mentions also to:
Unfortunately the culture of turning a blind eye to dodgy actions is endemic now. In my playing days we played a team who had three out of five bowlers who were blatant chuckers. When I asked the umpire (amicably) whether he agreed he said "yes, of course, it's bloody obvious, but if I call him for chucking it gets referred up the line and will ultimately end up with a letter from Lords. It's just not worth it".