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Worry #1 is probably not that devastating a concern. The Google platform distribution shows only 0.3% of users are running 1.5 or below at this point. It is my experience that few apps support Cupcake and below.
While it's clear that users have limited comprehension of the permissions requested at install time (for instance see: Android Permissions: User Attention, Comprehension, and Behavior) it is rather suspicious that a trailer application require access to your contact list. From the sounds of it the malware doesn't do much other than siphon off your contact list & some identifying information (Android ID & phone number).
Should it be removed from the Android market? Yes. Is it the best example of subversive Android applications? Probably not.