I do hope you were writing "tongue-in-cheek". It is certainly not my intention to jeopardize VLC or anything/anyone else, for that matter. One can easily use the (free) Windows Media Encoder and the (free) Windows Media Services from Windows 2003 server and get around that problem. We are looking for a legal way to stream live concerts, to which we own the rights and have the performer's permission, in a not-for-profit environment.
However, on the issue of Theora and Vorbis, my understanding is that nobody develops anything for them unless they agree to the Open Source agreement. I don't know about Theora, but haven't heard of any pending litigation on the issue of Vorbis, which has been around for quite a while. Maybe you could bring me up to date on that, and also as to why you feel Xiph's Open Source agreements are not what they seem to be. Is there something afoot that I don't know about, akin to AT&Ts current "screaming" about MPEG4 patent infringements?
In any case, it appears from my testing that VLC cannot encode Theora and Vorbis together in realtime. Maybe there are some other solutions that can. VLC crashes everytime I try it.
CG
OK, in the case of MPEG-4, you won't get sued, but VideoLAN, which will cause VLC to disappear and will prohibit you from using it.
So it's not a short term problem, but a long term problem that is less likely to directly have consequences for your legal status.