Downloading Youtube FLVs – legal or not?

I`m still considering releasing my RichTube – Youtube Apollo tool to search, watch, download and organize youtube videos.
You can watch a screencast here. The more i think about their Terms Of Use i think that they are just wrong saying donwloading is not allowed because they are a streaming service.
What is the difference beetween progressively downloading videos to the users cache (what they call streaming) and downloading them elsewhere?
Here is an interesting statement from youtube:

What is your opinion on this?

BTW: cool updates for RichFLV are on the way. Quite busy at the moment may take till end of next week.