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The legal issues here are not black and white. At the moment, we have two conflicting laws. The DCMA states you can't monkey around with DRM. However, the Copyright Act gives you the the to make a fair use backup copy. In the case of a DRM'ed electronic copy of book, these laws are not compatible: one gives you the right to make a copy of your book, the other says you can't strip the DRM to do it. However, by not allowing you to make a copy, the DCMA strips you of your rights under the Copyright Act, and thus is "illegal". It is going to take a court decision to sort this out - the judicial branch is going to have to decide what is more important from a Constitutional perspective: the right of a company to arbitrarily lock it's content down or for an individual to do what they want with a piece of property they own. I think you can see from by biased framing of the question which way the judges are likely to lean. So, the DRM players (DVD makers, MP3 sellers, etc.) haven't dared to sue anyone for backing up their content: they don't want a precedent set that will unleash a flood of backups. Right now, the DCMA stands as a threat to copiers, though a toothless threat for individuals.
The short is, yes, according to the DCMA, to buy a Kindle book and strip it of DRM is illegal. However, the Copyright Act gives you permission to do this, so it is also legal. And I think the odds are very good that Amazon isn't going to choose any of us to send this contradiction to the Supreme Court to get sorted out.
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