In my opinion the law makes no sense as you should be able to remove the ABS as it was only an option on the car and not standard. There are models without ABS floating around such as mine which is a 97golf. However I do agree that if you do have it on your car then it needs to work. There are plenty of threads here telling you how to check the control module and even a thread (is it on here or another site?) on how to repair an ABS sensor.
Personally my next car will not have ABS. This is my own choice. I will buy a car with no ECU in it. Will have the minimum of guages and sensors as well. I will enjoy driving and my car will be a full frame car which will protect me better than any ABS, airbag, magic sensors ever could.
Funny how there is no way to test a 20 year old airbag to see if it works or not..I'm sure a lot of them wont work properly even if the airbag light does. You can remove the steering wheel and put your own on and even disable passenger airbags and the testers are ok with that. Airbags were an option as well I believe. Why the difference with ABS is not understandable..one is ok to disable the other is not...

As far as I understand if the ABS is faulty the car reverts to braking in the same sort of way that a car without ABS does...all the wheels lock at the same time...so the brakes work and are functional...just the same as on my Golf which has discs and drum brakes....my car without ABS passes and yours does not event though yours will brake better than mine as it has discs all around...