You're agreeing to their terms when you sign up for your Amazon account. If you're buying things that you shouldn't because of geo-restrictions then they have the right to close your acount. You don't own it. You are in essence renting the items because of Digital Rights Management. Read the TOS. It's in there.
If you're buying stuff you're entitled to buy for the country in which you live, you'll be fine.
As to the Wifi, I don't belive the unit is defective. I believe you don't have it set correctly. Airplane mode on or off is a little more confusing terminology than simply Wifi on or off. You want Airplane mode ON which means no Wifi. Airplane mode OFF means the Wifi is on. Connecting and then disconnecting the reader to your computer doesn't turn Wifi on or off. I think it was already on, then turned off when you connected to the computer and reconnected to the Wifi network when you disconnected from the computer.
And as for changing the location of the Wifi settings without asking, they don't have to.