IANAL*, nor am I qualified to give you legal advice, but I keep reading
these messages on this list.  I would think there's a difference between
"illegal" and "in breach of contract".  ie: The police can put you in prison
for the first one, and you can get civilly sued by an individual or company
for the second.  I would have thought that in most countries what you do
with your phone after you have purchased can really only invalidate the
warranty, or breach your contract with the teleco. That would potentially
put you in line for a civil case against the teleco, but not have the police
come looking for you.
I'm guessing you come from America, where I think the RIAA / MPAA have
muddied the waters about what is and isn't illegal.

With regards to Google, and again with the proviso that I'm not in the lagal
profession, I would suggest that they don't actually have any control over
what you do with YOUR telephone, which was in any case made by another
company. Don't forget they sell the Dev phone completely unlocked.

*IANAL = I Am Not A Layer.

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