Where the hell did you get that info from, illegal, I very much doubt it.
I can second WIll on that, - they are illegal here in Denmark too, as any other unauthorized radio transmitter is. the national FCC's are very strict or I guess you could say conservative.
A related story, - In France the Apple AirPort (wireless networking on the 400Mhz band) was initially banned, but then they were forced to allow it partly, - so the message was:
"You can use the AirPort i France, as long as you don't use it near any of our secret military bases"...
well, go figure how you should know where the secret bases were,m but that was the message...
I think they have later abandonned that stupid wording :-)
I hope/guess the same will eventually happen with the iPod transmitters.