RE: 802.11 video
I bought one of these Hong Kong systems too. Mine is the so called 800mw system - which cost me $33 total ($5 + $28 shipping). I know everyone complains about the shipping charges on these things, but if you bought one, look at the postage on the package. The person I bought mine from had $29.10 postage on it! I found it hard to believe, but apparently international airmail really is that expensive.
As far as legality is concerned, most of the 1.2 gHz band (23 cm) is open to HAMS in the US. It is not illegal. Here are the [link=http://www.arrl.org/FandES/field/regulations/Hambands_color.pdf]legal HAM frequencies[/link]. The problem is that these transmitters are not accurately controlled, and most of them appear to be skirting just outside the lower frequency limits. The output frequency is dependent on the power supply voltage. Sometime I'm going to hook mine to a spectrum analyzer and see just how much the power supply voltage really affects it.
I have a HAM license, and I definitely don't condone breaking the rules. However, the power output of these things is ridiculously low, not enough to interfere with anything more than a few hundred feet away. That certainly doesn't make it OK, but from a practical standpoint, it's extremely unlikely that one of these things will ever cause any disruptive interference.
The CMOS camera that comes with these HK systems certainly leaves a lot to be desired. The dynamic range is poor and the AGC circuit makes the ground appear very dark if a portion of the sky is visible in the frame. The camera is also plagued by problems with internal reflections... it really needs a small lens hood. I've heard that many of these cameras have a voltage regulator encapsulated in their power cord, mine apparently has it internal. I accidentally hooked the 9v battery to mine backwards once. The camera got very warm, but it didn't kill it. Once I realized my mistake and fixed the power connector the camera still worked OK!
A CCD camera such as the Panasonic CX-161 or SuperCircuits PC-87 is definitely a major improvement. Black Widow A/V sells the CX-161 for a slightly lower price than I paid for my PC-87, and they appear to be identical based upon the description. Wish I had noticed it sooner.