No doubt in my mind the anti-circumvention law is broken. It was from day one, and the need for a 3-year review of exclusions demonstrates this. A better law might simply make circumvention an aggrevating factor in an underlying act of infringement. I would even be ok with assigning liability to Person X who circumvents a copyright protection for Person Y, if Person X should reasonably expect that Person Y is going to use the circumvention to infringe a copyright.
However, as of today the law is what it is. The attitude in TFS is ridiculous, and reflects an ignorance of the DMCA exemptions that is perpetuated every time we summarize this particular exemption is the "jailbreaking exemption".
First, the exemption does very specfiically talk about mobile phone handsets and software on that type of device. You can call this arbitrary, but that's the result of overy-focused lobbying.
More to the point, while the law does allow for inconsistencies, I'm not so sure this is one of them. After all, not every act of cell-phone jailbreaking is covered by the exemption, and I doubt a person running a business to jailbreak other peoples' phones would be able to shield himself with the exemption. You can argue whether that activity should be covered, but I'm willing to bet it's not.
I point this out because this guy wasn't busted for jailbreaking his own console; he was busted for selling the service of jailbreaking others' consoles. The exception that covers the "app interoperability" part of jailbreaking specifies narrowly that the purpose must be legal, and while he says (with a wink and a nudge) that he won't aid pirates, I don't know that he can state any narrow purpose when he's not the one making use of the circumvention.
And if that sounds backwards - that he should have to prove non-criminal intent - well, I believe that's the nature of an affirtmative defense, which is essentially what the exemptions are. The prosecution has to prove (beyond a reasonable doubt since this is a criminal charge) that he committed an act of circumvention, then I'm pretty sure it's up to him to prove that an exemption applied.
All of this is a symptom of the underlying broken law, of course; but that's not to say that this guy would walk if the law were "right". If circumvention were a civil matter, and if it were only illegal when linked to an underlying act of infringement, then someone wanting to offer circumvention services might be able to write up contracts requiring the client ot state a legal intent and to indemnify the business against claims resulting from infringement related to the circumvention. I don't get the sense this guy was running that thorough a shop, though, which means he might still have ended up on the hook.