[indianaV8]

Great post Dan (as usual). One remark:

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The second involves using means that would potentially be considered privacy violations, but can give a much more accurate picture as to what was really going on. For example, Full Tilt's software could monitor other processes running or take occasional screen shots. Either of these could provide the smoking-gun proof of botting, but they would be hesitant to cite such specific evidence, as a separate scandal involving privacy violation would arise.

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Two things here
1) Monitoring processes and taking screnshots rarely can provide you with evidence about bots. Bot stealth mechanisms are much more sophisticated than that.
2) I don't think sites are concerned about breaking privacy. When you join a site, you sign that they can scan your disk and PC 100% and they do it.

In the past party poker (beside screenshots and so on) was installing keyboard and mouse hookers and even injected code to started programs (all this confirmed) and will also (not confirmed) monitor your MSN conversatons.

So if one has any privacy concerns the best is to just use software like VMWare (so create a VM whcih you use only for poker, and don't store any personal info there) and on that VM uninstall the microsoft windows client services.