Given a search warrant the ISP will provide all the logs and so on without needing the machine to be seized, they have clear procedures in place for it. They should also have secure backups to reduce the likelihood of tampering. Like any company they also have procedures in place to audit their kit to stop this sort of thing, and having multiple admins with access makes it harder to hide, but if the cops think it's inadequate they'll still seize kit to check. Citizens (in most countries) can do whatever a company can, but don't always get the same protection that's offered by doing it commercially with the corresponding requirements for regular checking. There's nothing stopping an individual getting their access mechanisms and machine audited, so if something illegal shows up through hacking or a virus then they'd have a defense in court, it just doesn't happen because it's expensive and not worthwhile.
Not at all - just because it's a TOR endpoint and any traffic there is a dead end doesn't invalidate checking all the other forensic options like browser cache etc, running TOR could just be a way of hiding in data volume. It's probably not the case, but if they don't follow a piece of evidence then that's bad.
You're right - it's like lending someone a car which they then commit a crime with; you're not guilty of a crime, but it's still fair enough for them to impound the car as evidence.
On second thoughts you're probably right about the storage space, although the only sensible article I could find was http://mradomski.wordpress.com/2008/05/14/human-brain-capacity-in-terabytes/ from 2008. Interesting example for the processing power, but their are savants who can do that sort of thing, it just isn't what we were designed for.
Much the same as I said on my blog at http://www.pseudocode.eu/archives/2011/08/algorithm-bashing.html. Call it an algorithm and it sounds mysterious, whereas call it a calculation or process and it's boring and fine. The human brain still has more storage and computing power than Google (I'm guessing here), so I probably use more complicated algorithms choosing my shirt than they do with PageRank or Netflix do with their recommendations.