Interesting, I'm doing an ICA on this - I choose the topic that interest's me. It's actually IT Law, based on UK law. (Can reference american case's though too)
Main point within the ICA is..
It's legal to sell on modified consoles, but it's actually illegal to sell the equipment which allows this. So I am allowed to sell a modified WII. But I can't sell the the part individually (Playables VS Nintendo)
will make for an interesting point within the ICA anyway.
I think at this point in time, they have to be able to prove beyond reasonable doubt that the piece of equipment (normally a modchip) is mainly used for piracy, so forget that you can play homebrew, as the main part of this is to play piracy games (even though to play homebrew you need to be able to get past the hardwares security) - which is in itself a breach.
Other argument is that customers, wish to be able to do as they wish as they've bought the console. - which is a fair point, and one which I will note.
Dunno which was the first case to make modchips illegal, basically looking for the legal precedence. I found Gilham v the Queen.. Is this the earliest?