I went to look at the TOS, but this version: http://sketchup.google.com/intl/en/3dwh/tos.html doesn't contain the reference to "Photo Textures Model". It must be a defined term and I assume it must refer only to streetview imagery (where Google has copyright). They can't restrict what you do with a textured model where you own the texture photos.
To be compatible with OSM, the georeferencing should be derived from OSM, not Google Maps, otherwise you could be falling foul of "you may not: (ii) use or distribute Content obtained from Google Services in a mapping or geographic application or service." and general copyright issues.

I didn't understand the stuff on openarena but I do think the opportunity to "walk around" at ground level in OSM shouldn't be too difficult to implement and would provide a great new perspective. The main thing would be to find new ways to represent the information so that a bus stop or postbox appear as a recognisable object on the street.
The other issue is that lots of plugins are currently required to display simple 3d in browsers but that may change in future generations with better 3d support in HTML5.

If I understand the OP correctly, this area was not in OSM. It had been mapped on paper but not yet uploaded. Some data is better than no data, although it must be free to be fixed up however the OSM editors think best.

I'm no expert on the situation in the US, but there was a mass-import of Tiger data (described on the wiki) and in many cases these streets have been found to be shifted. It may be worth asking through one of the mailing lists (talk-us) for someone else to take a look and advise you.

well done. I don't if you ever saw ITO's video animation of edits during 2008, but there was a particularly dark patch in Africa. When I checked out where it was, I found it was Angola. Sadly I am not in a position to do anything about it!

My impression is that one use for this software will be for architects to put a planned building into context. I think it will be hard to argue that their model is derived from OSM data, just because they placed it on an OSM base map. Lawyers can argue for ages about these things!

These diaries are quite a good way of communicating with the community...

Indeed, this generates lots of hits as expected. It did flag to me that some of these places may be named after other Darwins, but that should be a small issue and some could always be removed manually if they are obvious.

what a great way to get lots of responses on your diary page. I couldn't resist.

Great. The palace building isn't even properly outlined, but I should be able to do that from Aerial photos.