I believe they are illegal because the FDA forbids toys being sold with food or something along those lines. Nothing wrong with the egg itself, but the fact that it is sold with a toy inside is apparently what makes it illegal.
From what I understand, it has to do with Nestle/Mars rivalry? About 10 years ago, Nestle came out with a "WonderBall" (anyone remember those?). It was a chocolate ball, with packs of candy and stickers inside. IIRC, Mars didn't like this for one reason or another. One thing led to another, and the "WonderBalls" ended up outlawed because "kids might choke".
Something like that, anyway.
Personally, I love Kinder Eggs. I'd love to be able to buy them regularly.