Sounds to me like the no-hacking rule is ass-covering.

1. If you hack the box and it dies, no warranty etc - just like Tivo and most other consumer electronics out there today.

2. If you hack the box to upload/download shows to/from a Tivo or whatever other boxes are out there or the internet or from whereever your hacked/promiscuous little Replay box hangs out - and you get sued by the MPAA, then Replay will disown you - hopefully to try and keep the (MPAA) lawyers off their backs (well no more on their backs than they are now :-P )