I'm torn on this. In one way I would love to see what would happen to the industry if mp3 piracy was made legal (at least for RIAA artists), however I definitely would not want bootlegging (as in copying of commercial CDs and selling as the authentic deal, not live CDs) to become legal.
Personally I would still buy CDs if I could get them all for free off the net, but definitely not as many. The ability to discover what is crap and what is worth buying would have reduced my last years purchases to two-thirds what I bought. Also, this sort of distribution would almost make the idea of singles completely pointless. I'd miss the b-sides.