Is Digital Copyright Meaningless?

An article I have read in the past (and re-read today) is one of the best arguments against digital copyright I have ever seen. It is well written (although a little long) and does a fantastic job of poking holes in digital copyright.

Here is the article: Monolith: Muddying the Waters of Digital Copyright Debate

In the article, written by Jason Rohrer, we are given the specifications for a program called Monolith. The only thing that Monolith does is take two digital files and XOR them together (interpretation: the two files are blended together).

He presents his argument in two steps (as I see it):

Step 1: Digital files, made up of 1's and 0's, are not inherently copyrightable

• 1's and 0's exist in ALL digital files
• a section of the Bible is shown to have the same bit pattern as a section of a copyrighted mp3
• a single copyrighted work (like a song) could be encoded in so many different formats that you could argue there are an infinite number of ways it could be digitized (i.e. with 0's and 1's)
  

Step 2: Therefore, the digital bitcode is not copyrighted, but the content, particularly the presentation of it.

• If an mp3 file exists on your computer that, when played by a standard mp3 player, would produce the sound of a copyrighted song, that content is copyrighted and therefore that digital file
  

His entire article is presented much better than these simple points, but I just wanted to summarize for those who don't want to read the entire thing.

So here is my question (based on what Jason has been saying):
1.1) Assume I have a digital file. When I open this digital file in a text editor, it displays a portion of the Bible. This is not illegal for me to have, because the Bible is in the public domain, correct?
1.2) But what if I opened the digital file with a modified video player (modified to use the Monolith program), and it starts to play a copyrighted movie!
1.3) Certainly it is illegal for me to play this movie unless I own it. But is it illegal for me to have the digital file (which is arguably the Bible)? Or illegal for me to have the video player (which has no idea if the movie is copyrighted or not)?

2.1) So, let's say I distribute this digital file that can be read as the Bible.
2.2) Let's also say that I host my Monolith-modified video player on a website.
2.3) Is it illegal for me to distribute either of these files?
2.4) Does it become illegal if I tell someone how to merge the two files?
2.5) If 2.4 is true, then if I (the uploader) didn't tell everyone how to merge them, but someone else did, would I be legally in trouble, or would the person who explained how to merge them?


It really does raise some interesting questions about the nature of copyright.