The iPhone wouldnt be as good if you couldnt jailbreak it and would be just another phone. Jailbreaking is what makes it great and it is a much better device when jailbroken. Some people fret that it is a bit buggier and even though i cant say for certain because ive never had one that wasnt jailbroken, ......id rather have it a bit buggy than not have a jailbreak on it.
As for being illegal. It isnt illegal. It is my phone and i can do whatever i want with it. If they dont want to warrant it because of what ive done, that is their perogative.
You're correct, it's 100% legal... I'm OCD, so if the phone isn't "vanilla," it's not appealing to me. Sure there is a "wow factor" for a few days, then I grow tired of it. It's just my opinion though.