If it's redistributing iOS, this sounds like a simple, old-fashioned copyright violation. That sounds like the kind of thing Apple would be likely to shut down, and I can't really say that I blame them, even though this is a cool idea.
If you read Xuzz's comment up-thread, he specifies that you (the user) download the firmware from Apple: this project does not require any redistribution of any of Apple's intellectual property.
