For the most part I agree with you, and think the DMCA is the worst thing Clinton ever signed. I slightly disagree on one point though:
>> the DMCA does not make allowances for hackers attempting to restore machine capabilities.
Section 1201 has seven exemptions. The three that I think are relevant are:
- Reverse engineering in order to develop interoperable programs; [1201(f)]: I believe this could be construed to include homebrew apps.
- Encryption Research; [1201(g)]: Definitely part of what they were doing.
- Security Testing [1201(j)]: Also what they were doing.
Also, don't forget that there are other exemptions in there for legally obtained video games, and iPhone jailbreaking. It's not inconceivable that PS3 jailbreaking could get added as an exemption as a result of this case.
And on top of all this, as I said earlier. The fail0verflow guys are in Europe. The DMCA does not apply to them (another reason America should have fewer stupid rules/patents tying the hands of innovation).