Read the quote you cited again. He didn't say there was no law covering it. He said there was no *criminal* law covering it. Now go actually read the white paper. The question is whether it is "distribution" or "unauthorized performance". Either way it is copyright infringement (in his estimation, at least), which is illegal. But only distribution is criminally punishable. Unauthorized performance only carries civil punishment.

Sad to say, no amount of explaining that a 1 is a 1 is a 1 on a hard drive and the MP3 read will be identical on any brand

Hmm, I think I'm with the audiophile with this one. On a Western Digital hard drive all my MP3s sound different. They all sound like "click, click, click".