Clearly the LP is free advertising for Nintendo, or anyone, is false. If it were advertising it would spur on sales. Do you see Nintendo getting a big sales boost from LP? There is a good argument to be made that the LP that shows you the entire game puts a negative effect on game sales since you no longer have incentive to get the game.
Nintendo is at least taking the less evil route. You get to use their game footage however you please, but you can't make money off of it. It'll decrease the pirates that show you the entire game as a "movie", and people who have something neat to show everyone can get to show everyone.
As for Sony's option to let people record games I'm concerned for other reasons. Recording take a lot of processing power from the card. It's a feature that will work in the short term, but if games start using all the power of the processor then attempting to record a game will turn it into rubbish quickly.