Here's an interesting discussion of the ethics of the legality of falsely claiming to have won a medal. The author, Dan Demetriou, suggests that such false claims should not be illegal, as they are under the Stolen Valor Act of 2006, and that "the law should not enforce the honor code, but [...] private individuals should through public denunciation and social sanction."
I'm not sure what I think about this (I do reach a conclusion by the end of the post though) but it's interesting to me because for nine years I wore the uniform of the unorganized Virginia militia, which to the untrained eye looks exactly like a US Army uniform. (Most VMI faculty members wear this uniform, but it took a while for everyone to realize that non-US citizens like me are not supposed to do so.) As a result I was stopped more than once on the street and thanked for my brave service to the nation. A real soldier once even asked me where the nearest PX was, which meant I had to explain that I wasn't a real soldier and didn't know. This was all embarrassing, and I felt as though I was involved in a kind of fraud. You can imagine how little college professors dressed as soldiers actually look like soldiers. The VMI line is that we should wear the uniform with pride, and make an effort to keep in shape, learn how to salute properly, and so on, so that we don't look silly.
Some military people take the view that being allowed to wear the uniform is an honor. Others believe that this honor only makes sense when those wearing the uniform do so because they have earned the right to do so, by joining the real military. It's reminiscent of the Chesterton story in which Father Brown explains that a deconsecrated church is no longer a church, no matter how much it looks like one (which in turn is reminiscent of Socrates' joke at the expense of Crito, who asks how they should bury him--Socrates replies that it is only his body that they will bury, not Socrates himself (it isn't a very funny joke)). It reminds me also about the debate about same-sex marriage and whether this would be real marriage or merely resemble it, and whether such resemblance would matter or not.
We can take different views when it comes to uniforms/medals, churches, bodies, and marriages, but in each case two positions stand out. There is the view that technical differences make all the difference, so that it does not matter at all what happens with deconsecrated churches, dead bodies, gay "marriages" (scare quotes to reflect the position of people who would not recognize such unions as marriages in any sense that mattered, which is not my position) or non-real-military uniforms. Call this the Father Brown view. And there is the view that apparent similarity matters. Turning a deconsecrated church into a public toilet or a brothel would then be blasphemous. Throwing Socrates' body in a landfill would be an insult to Socrates (as well as to human dignity), wearing the uniform of the unorganized Virginia militia badly would be an insult to the US Army, and allowing same-sex marriage would say something about traditional marriage. (Whether this something was an insult or not--I don't think it would be, but others disagree--would depend on the propriety of same-sex marriage.) Call this the Anscombe view (because I think it's what she would think about at least a couple of these issues).
I side with Anscombe (or "Anscombe," if we're being careful), but I don't know how much I can do to justify this. It's tempting to think that what matters is the intention or attitude of the people doing the alleged insulting (you get this a lot when the issue of confederate flags comes up--"I have no conscious racist motive, therefore my waving the battle flag of an explicitly pro-African-and-African-American slavery army is not a racist act"), but I think it's easy to see that this is wrong. The cultural meaning of actions matters, but not the individual intent so much. If I urinate on a church or a corpse then I have insulted it, whether I meant to do so or not (perhaps I was drunk and didn't know what I was doing). But if I am in a culture where urination is an act of respect then I have not insulted it. That's a silly example, but the traditional example of ways of disposing of dead bodies makes the same point. In some cultures burning a body is an insult, in others it's respectful. My point is only that the culture determines what is an insult and what is a mark of respect, not the thoughts of the individual agent, and not the reaction of any alleged victim ("It doesn't offend me, therefore it's not offensive"). If I take offense unreasonably then I have not been insulted, even though I feel as though I have been. And if I am very thick-skinned, or just beaten down by constant abuse, then I will not feel feel insults that are still perfectly real. Nor can I turn a compliment into an insult by a secret mental act. Respect and disrespect are public, cultural acts, not private, mental ones on the part of the agent or the patient.
Wearing medals you have no right to wear devalues the currency of respect. It is counterfeit valor, it seems to me, more than stolen valor. And this is a harm to the valorous (assuming that medals are awarded for valor and not for, say, mindless obedience to the imperialist dictates of the military-industrial complex). It takes away some of the respect, or honor, that has been bestowed upon them. Dishing out medals too readily might have much the same effect, but it isn't necessarily dishonest, and it would be difficult to use the law to ensure that it never happened. Pretending to have been awarded a medal not only contributes to "respect inflation" but it also does so in a way that shows disregard for the respect in question (whereas simply awarding too many medals is compatible with high regard for what each medal means--it shows rather an overestimation of the worth of some actions).
Apparently free speech is considered relevant to this issue by some people, but I don't see any reason to believe that people have a right to make false claims. Jokes, yes. People should be allowed to wear fake medals for purposes of satire, political protest, and theater. But it seems right to me that deception for personal gain should remain illegal.