I know it's against the terms of Blizzard's TOS, but it's only technically illegal in the sense that they broke a user agreement, I don't think many courts would even bother nor would Blizzard go to the trouble of calling the police.
3: More of a personal thing, but this type of 'crime' is not the type I think people should face jail for, maybe community service or garnishing their income to a reasonable degree. They shouldn't have their lives destroyed over it.