This is like Microsoft trying to incriminate you for buying Donkey Kong for your Wii.
By definition, there's no such thing as an "illegal transaction" in terms of Bitcoins.
My apologies, it seems I haven't expressed myself well. I don't mean to imply that Bitcoin has a problem with illegal activity, merely that if one could argue the case then one could almost certainly apply the same argument to fiat and corruption.
I certainly have no ethical hang-ups with using Bitcoins and indeed feel better about trading with them than with Sterling.
