I have not read all the comments, but from what I read, I am really shocked and feel so sorry for you. This should not be happening at all! Nobody will report anything if we have this fear hanging over our heads! I am sure none of us would make a report to CAS if we didn't have good reason...and I am sure it took a whole lot of debate and worry before deciding to do so. To now be sued for trying to protect a child (whether or not the child ended up being proven to be neglected/abused or not) is really disgusting.
I really think you should take this to the media. In particular, CBC has a new (I think) program called "Go Public". I just noticed the other day that they were asking viewers to contact them with stories. This seems like the kind of story that people need to hear about and perhaps that way you will get the help you need. Good luck!!!