Full disclosure: I was a "professional" poker player in that for a period of 8 months my sole income was from online poker playing while I put myself through paramedic school.
You both make some interesting points.
My main thing to ask all to consider is that it is in a poker site's best interest to keep the games as fair as possible. The sites have no interest in which individual players win or lose, they make money from the rake (% of $ taken from each pot) regardless. More players playing = more money made.
Any perception that the site is doing something shady will result in fewer people playing and therefore the site will make less money. It's not even worth secretly pocketing 1/5/10% of players' table activity when that number will pale in comparison to the cumulative rake of all action.
One point about sites showing different hands to different players is not a possibility. Any random person can always railbird a table (view the action without actually sitting and playing.) This deception would be discovered immediately.
This possibility of anonymous statistics gathering also serves as a check in that it would be discovered if a poker site's random hand generator is not random.
As far as gov't getting involved, it seems silly to not regulate (to ensure "fairness"), legalize and tax it. Saying "it's illegal" will not stop people from playing, it will just give people shadier options.