I saw it on the news earlier, to be honest, I think it's impossible.
ISPs can moniter traffic, but they cannot get access to the data which is being transferred. At least, that's what I heard on the news.
Only people stupid enough to use programs like Kazaa and Limewire (Two programs that were discussed on the news) would get the "warning email".
Also, no matter what they say, I think a "warning email" would be retarded, seeing as it would probably be picked up as spam and trashed.
The law probably will get passed, but I doubt it will be very effective, people will just use places like Rapidshare and Megaupload to share files.