"...worthy of being published on the lists of the highest prime numbers.[1] In a way, by having this number independently published for a completely unrelated reason to the DeCSS code, he had been able to evade legal responsibility for the original software."
Primes are pretty dense in the integers - unless you're going to say 'data can't be illegal' - including e.g. CP, then highlighting illegal primes is simply not a valid evasion.
No, jokes aside I don’t know either.
Alice publishes a truly random string of bits, Bob publishes a XOR of Alice's string with an "illegal" number. Information theory says you cannot tell which is which (and publishing a random string of bits is supposedly legal) but you can still retrieve the "illegal" number by xoring Alice's and Bob's strings.
I don't see how the known pass phrase achieves that.
Unless an omniscient observer knows the publication date of all the "halves" in the system, it is impossible to say which of Bob or Alice are telling the truth.
Of course, both parties are inherently slightly suspicious for using such a system in the first place, but if it existed as part of a free public hosting service, and lots of people used it for legitimate purposes, it might only be as incriminating as using BitTorrent.