IIRC they filth can't be prosecuted for act of stolen valor but can be if they use the false claim to perpetrate fraud.
Correct. But they won't be prosecuted under the Stolen Valor Act, they would be prosecuted under other laws that apply to obtaining goods under fraudulent conditions.
So I could parade around McDonald's all day long claiming that I won three Medals of Honor in Vietnam and I can't be prosecuted, but if I try to parlay that fraudulent claim into a free hamburger off the Dollar Menu -- ZAP!