Aequitas, if you would modify the script to allow for the admin to upload hosted vids (like I suggested a while back) and not provide a database of preloaded hotlinked vids, that would make it legal as you would then only be providing a tube site CMS and the liability for any content would fall on the owners of the individual sites...
the actual uploading could be done by ftp in batches or something... all you would need to add would be an admin interface to enter the flv url, title, category, description, etc. in the database...
no need to waste all the time you spent on it... just evolve it to be a more legit CMS...