However .... I just finished reading the actual policy.
http://www.cdt.org/security/20080716...h%20Policy.pdf
Having read it ... it states that it still requires probable cause. Further, they are not just confiscating people's laptops, iPods or ebook readers. They are permitted to make copies of the materials, but they are not to send original devices or documents in for examination ... unless there is probable cause to obtain a warrant.
Having now read the policy ... while I think they are still skating on very thin ice, I can see why the 9th circuit upheld it. For the average traveller bringing their music or books across the border ... it's going to mean nothing much at all.