Getting into the mining business would only help bitcoin, by further securing the network. It certainly won't allow them to distort the currency, since the rate of coin generation is built into the protocol.
Setting up exchanges really wouldn't undermine anything, people just won't use them if they know they're being tracked by them.
Uniting together and declaring it illegal is their only option, but they will have trouble justifying why it should be illegal. And they will also have trouble enforcing it, short of shutting down the entire internet.
It really is a fascinating technology, and if you truly want an alternative way of securely sending money, I'd suggest doing more research on it.
However, even at today's difficulty levels, this attack would be very expensive to maintain. With the introduction of dedicated mining ASIC's coming soon, the difficulty will rise substantially, which will offer even more security against this type of attack.