To go even further - by driving the distribution further and further underground it becomes harder to track down the originator and prevent the actual abuse. The police/politicians attack distribution because its easier and makes them look like they're doing something.
Exactly. Remember when file-sharing first became popular? Everyone used Napster, which had one centralized indexing server. If someone wanted content removed, they could just ask Napster and it would be gone.
This wasn't good enough for the RIAA, which shut Napster down completely. This caused the programming community to come up with an un-blockable alternative, and now everyone uses un-blockable encrypted BiTorrent with DHT. If you want something gone, there is nothing you can do short of shutting down the entire Internet.
(It wasn't un-blockable initially, but some greedy ISPs tried to block it, so now it's encrypted UDP instead of cleartext TCP. Now the ISPs can't block it reliably, and they waste their own bandwidth because UDP has no concept of a window size.)
So oops... now it's super-easy for people to distribute child porn, all because the music industry got greedy.
I should note, and I make this comment most of the time that someone mentions encrypted BitTorrent, that "encrypted" BitTorrent is not really encrypted. As you mentioned, attempts are made to fudge the protocol and make it hard to recognize that the BitTorrent protocol is being used.
It does not, however, provide any encryption or anonymity for your traffic. All packets are sent in the clear, your real IP address is still shown to all connected peers, etc.; do not rely on an "encrypted" BitTorrent connection to save you from a packet-sniffing fiend because the content you're downloading is not given any extra encryption by an encrypted BT connection, because the connection is not really encrypted in the classical sense, it's just obfuscated so that ISPs can't automatically detect BT traffic and disconnect/throttle/filter. "Encryption" was a bad thing to call BT encryption.
The IP address is an interesting issue; there is really no need to attach it the data that you send out, which is the illegal part. I guess too many ISPs use egress filtering to prevent clients from forging the source address? (Also, tit-for-tat would be harder without any verification of who's actually sending you packets.)
