I think that you are right about the capitol S. It is highly doubtful that it refers to the Illearth Stone, a fragment of which Troy could see from the Watch.
The Law ... the Law...
There's a number of times where Donaldson refers to specific, named Laws. The Law of Death, for example. And there are other times where he refers to Law in a more general way. He does so here; he does so again later in the book in the chapter
Gallows Howe.
In this general way, Law refers to something akin to the laws of physics, but, being in a fantasy world, that's not exactly accurate - they have some magic to them as well, and they're not as absolute. But they are still essentially a set of rules for governing how the world is supposed to work.
The Sea (capitolized, like the Land) is governed by those rules, like anything else.
But I don't think that merely tossing it about and making it do things is sufficient to break Law. If it was, it'd be breaking Law to, as Trell had done, raise the stone to ford a river, or to grow Revelwood, or to do a lot of other things.
I think that the giant Raver was doing more than compelling the Sea, he was "violating it" - he was altering something so fundamenal that it would be breaking Law. Breaking Law takes power -- lots of it -- and he had that power in the fragment of the Illearth Stone. But I don't think the author grants us knowledge of what exactly the giant Raver was "violating". I can imagine he was altering some utter essence of the Sea itself, fundamentally changing it so that it could serve the Despiser.
If you look at it another way, this is very similar to Elena's actions later in the story. By compelling the Dead to do her bidding, Elena broke the Law of Death. By compelling the Sea, some other, similar Law would be broken. But, again, don't ask me which one.
Similarly, we are never really told what the Despiser planned to do with a Sea which was successfully violated and under his command.
But does it matter?