Surely if someone gives you a product, you have every right to play with it in your own way.
Depends if you're being provided a product/service/license. Services and licenses can be revoked (even products if they're not entirely yours) usually products cannot.
As for whether or not it should be illegal, I'd say you'd have government resources better spent attacking more serious cyber crime and let the developers battle this.
It really depends on the TOS. Some games allow you to do it upfront, some don't say you can't, and some (hint hint Rockstar GTAV Online) try as hard as possible to prevent anything from happening to their game.