I think you're reading too much into this. The natural reading is quite clearly that the illegal categories referred to were or included "C4", and it'd be highly unethical for them to have framed the paragraph in that manner if they believed that not to be the case. It's worth noting that OpenAI's PR statement only goes so far as to call the situation a miscommunication, and doesn't directly assign blame to Sama, while Sama explicitly claims OpenAI asked for illegal categories in subsequent instructions.
Also, I'm not up on the laws regarding this stuff, but are the other, awful categories illegal to collect? If not, there's not much room for ambiguity.
It would be neat if you could drag and click to select an area to inpaint. Let's see everyone's new Penn Station designs!
Would guess it'd have to be BYOK but it works pretty well:
https://i.imgur.com/EmbzThl.jpeg
Much better than trying to inpaint directly on Google Earth data