Legality questions about Home Sharing

I have some legality questions about Apple's Home Sharing technology.
As I understand it, you can share (that is, copy it from one computer to another) your music, movies, applications and other iTunes-managed files amongst five computers. The only 'trick' is that each computer must have an iTunes Store account and must be logged in in order for it to work.
My question concerns the copying aspect and the legality of it. For content that was purchased through the iTunes Store I can see how Home Sharing can provide a limitation on content sharing, since all of the machines would need to be connected to Apple's servers in order for the validation process to happen. But what about content that was added to iTunes through other means, e.g., ripping my own CDs or converting my DVDs? These items can still be copied via Home Sharing and as there's no DRM on them there's no way they can be protected against "illegal" or "unauthorized" use.
It was my understanding that if I gave a copy of a song to someone else, that's illegal. Apple's Home Sharing technology seems to facilitate this action. If I rip a CD or DVD into iTunes and someone copies it out, isn't that making an illegal copy? Can I be held liable for distribution of content?
And how far does this extend? If I live in a house with four unrelated people, are they legally (?) allowed to copy music and media amongst each another? Is there a perceived or actual difference between using Home Sharing to copy a movie versus, say, using a USB flash drive? And what if one of them moves out? Am I legally obligated to go through that person's hard drive and remove content that they copied from me before they leave the building?
Does Home Sharing somehow retroactively change the copyright application on a given CD or DVD? Most of my CDs and DVDs contain notices and warnings against distributing copies. Can these warnings now be ignored, or at least amended with "...unless you're using iTunes Home Sharing" at the ends of them?
I am not trying to stir up a hornet's nest here. I'm only trying to better understand the legal issues surrounding Home Sharing and particularly how they relate to unprotected content. It seems very contradictory that the RIAA and MPAA would be fighting so hard against peer-to-peer services like BitTorrent and Gnutella while apparently allowing peer-to-peer services through iTunes Home Sharing.
Furthermore, I also understand that the intention of this system was to allow families who are living together to have common access to all of the "household" music, but my issues aren't about this. I envision, for example, a college dorm building where there's several hundred people living together on the same network subnet, and all of them have Home Sharing enabled and everyone is copying thousands and thousands of songs to/from one another. Is this now legal?
Any insights would be appreciated. Thanks.

If I rip a CD or DVD into iTunes and someone copies it out, isn't that making an illegal copy?
RIPping of commercial, encrypted DVDs (most of them) is illegal to begin with. Or rather, breaking the encryption on a DVD is illegal and in order to RIP the DVD, you must break the encryption. SO you have already "broken the law" by having a copy on your computer.
Most of my CDs and DVDs contain notices and warnings against distributing copies.
Most of your DVDs have a notice about even simply making a copy, not only distributing copies.
Much of your post has been cussed and discussed by many, many people (lawyers, corporations, organizations, individuals, etc.) and no one has come (or likely ever will come) to a complete agreement.
Generally, "sharing" in the same house hold amongst family members seems to be okay. Outside the same household/family is almost always not okay.
I envision, for example, a college dorm building where there's several hundred people living together on the same network subnet, and all of them have Home Sharing enabled and everyone is copying thousands and thousands of songs to/from one another. Is this now legal?
No.
This is exactly what Napster was and why they were sued & shut down.
I imagine Apple lawyers have done their homework as well as consulted with the labels to discuss these exact issues.
And it's called "Home Sharing" to indicate that it is not "Dorm Sharing" or "Workplace Sharing", or even simply "Library Sharing"etc. even though it may be possible to use it in other places than the Home.
Users on other computers need to know your iTunes ID and password to enable it Home Sharing. Likely this is how Apple got the lables to be okay with it.
Are you gonna give (and get) dozens/hundreds/thousands/any other users your iTunesID & password?
You can contact Apple Legal here -> http://www.apple.com/legal

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Philly_Phan wrote:
crh24 wrote:
Graig Kivell wrote:
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