Well, it's not too tricky to buy foreign computer games in Australia; the authorities don't care that much. And the drug thing? Well, it remains to be seen how long it'll be before the authorities shut that one down.
Many people hear that btc is an "anonymous currency" and think they're free to participate in all kinds of illicit activity on btc. The reality is that every btc transaction made is publicly recorded and the so-called "anonymity" depends on the obscurity of the btc addresses used in the transaction. Also note that these implications are not necessarily isolated to one transaction; if you and your partner both make a trade using new btc addresses, the coins that were traded can be traced all the way back to their generation and perhaps someone two transactions up the chain will provide a lead as to who is doing what ("oh yeah, that was a trade I made with Johnny...").
Additionally, if the government ever seizes the wallet of a dealer, which is likely to occur in the event that a search warrant is executed, they will have a list of addresses with whom the dealer has traded. These addresses can then be found and traced in the publicly-available tx chain. In this way even innocent people may be implicated in investigations surrounding illicit trades, and trading with a person that doesn't understand the implications of reusing or publishing a btc address can significantly weaken not only your transactions but other transactions that occur in the network.
The anonymity issues surrounding bitcoin are certainly more thorny than they appear on the surface. If you intend on using btc for illegal purposes, you need to understand what you're doing and be very careful, just as I'd imagine you need to do when trading illegally in other media.
Theoretically, someone could make a BTC to BTC anonymizing service. You could even put your BTC through multiple anonymizing services, similar to how you can route network traffic through multiple proxies.
Yeah, his description qualifies as money laundering; it's not any different than running the money through multiple proxies (fake businesses, escrow services, etc) in real life. And if a guy gets brought down after using this kind of thing he'll still get stuck with a money laundering charge; it doesn't become legal magically just because it's done with btc.
