Good article. I've been living and working here for over 14 years now, and you have quite accurately presented some of the more interesting and/or bewildering aspects of Chinese society and governmental policy.
However, the concept of a "ban" here, as pertaining to art/media, really amounts to little more than "empty policy" for the sake of nationalistic propaganda. This is not just due to piracy, the grey market, or having the largest tech-savvy online population in the world. Rather, it's a matter of contradictory policy within the republic itself. A prime example of this is the fact that I have ordered and purchased uncensored, original copies of games through Hong Kong for at least the past 10 years.
These games come to the mainland via regular registered post, and are often inspected by customs prior to delivery. There is nothing "grey" about it. I'm talking about the uncensored Asian versions of Fallout 3 and New Vegas, the Splinter Cell HD collection (one installment of which tasks Sam Fisher with some VERY touchy espionage/wet work- fans of the series will immediately recognise this reference), and even Operation Flashpoint: Dragon Rising. This last title is not a good game, but the similarities between it and the current dispute regarding Diaoyu Islands are striking, albeit with the added incendiary element of American troops thrown into a fictional conflict with PRC troops. My point is that these titles are all available to me on mainland China, from a "special administrative region" of the PRC, without the need to resort to piracy or a grey market.
Now, take such inherent contradictions and combine them with a young, wired-in population that has a higher standard of education than ever before, and then attempt to contain all of this within a system of control that conforms to both a strictly communist nationalistic dogma AND a frenzied capitalistic mantra.
The result is an untenable bubble, and that is the bigger issue. No amount of "artistic tiptoeing" is going to alter that, nor does it even significantly affect sales or publicity within the PRC.
The situation certainly is dizzyingly dynamic, incredibly interesting...and more than a little frightening.