However, like Limewire use to be, I don't think it's technically illegal to do so.... at this time.
Nope, it is technically illegal. Just like EULAs are court-enforcable so are ToS/T&C
http://www.youtube.com/t/terms
Content is provided to you AS IS. You may access Content for your information and personal use solely as intended through the provided functionality of the Service and as permitted under these Terms of Service. You shall not download any Content unless you see a “download” or similar link displayed by YouTube on the Service for that Content. You shall not copy, reproduce, distribute, transmit, broadcast, display, sell, license, or otherwise exploit any Content for any other purposes without the prior written consent of YouTube or the respective licensors of the Content. YouTube and its licensors reserve all rights not expressly granted in and to the Service and the Content.
Well you technically download every video you watch on youtube, iirc when I used Opera for a while, it kept cache files of streaming video and audio, which I could watch/listen to offline.
Technically true for the flash-based Youtube, but not true for webM-based Youtube. Flash based youtube uses "http://en.wikipedia.org/wiki/Progressive_download".