And no, Dwolla is not illegal, where as Bitcoin is in violation of the laws of nearly every country.
Bitcoin is not in violation of any laws in most countries. That is, as far as I know, it is perfectly legal to own, buy and sell Bitcoins in most of the world. Many things that can be, and are being, done with Bitcoins ARE in violation of laws, though.
Im not a law expert so grant me that. But in most developed countries, sending anonymous payments to anonymous users, tax free, and/or using an alternate currency within those borders is absolutely a violation of law. It is in the US for sure.
So you really do not understand how BTC works.
BTC is "pseudoanonymous" (not anonymous). Additionally, all the transactions are public. Legitimate business transactions can be very easily tracked, much easier than with cash.
And BTW: cash has very similar properties to BTC - and if you operate only in cash you can also be "tax free". Which obviously does not means that cash is illegal.
Put that way, that's a good point however that means you have to define BTC as an actual currency and using an alternate currency is against the law in the US.