Well, to be honest, i'm not so sure that they should be. Why should you be prosecuted for looking at child pornography? Because you and I find it morally abhorrent? You may be able to argue that it creates a demand for the product, which leads to more abuse, but that argument is tenuous and ought to be born out by something other than conjecture before it's etched into law.
That being said, I suppose it's irrelevant what we think the law ought to be, the law does define the consumption of child pornography and therefore the facilitation of that consumption to be a crime, and by extension to be causing some kind of harm. However, all investigative agencies via undercover and covert informant based work engage in this sort of behavior, that either supports indirectly or prolongs unnecessarily some level of criminal behavior in order to infiltrate and stop a greater criminal syndicate from operating. This is not even remotely unprecedented, and, in my view is a fundamentally sound principle to follow. If you can prevent substantially greater harm (actual child abuse) by temporarily facilitating a very small harm (consumption of images of child abuse), you should do so.
I agree with your points about the legality of the material and share the thought that more research should be done.
What doesn't sit well with me is the government directly running or supporting illegal behavior. If they had infiltrated the server and backdoored it(say by offering tech support) while the owner ran it I would not have any problem. When they took over the server by not shutting it down they became the top of the criminal syndicate not just someone providing support.
I have similar problems with when they arrest a group of 'terrorists' by actively recruiting people, putting together a plot, providing the (fake) explosives and finally using tactics akin to brainwashing and abuse the get the 'terrorists' to carry out the plot so they can be arrested.
The entire reason they have leeway is so they can get the head of the organization, not so they can be the head.
Addendum: I want to thank you for being able to discuss this without being emotional and resorting to personal attacks. It is rare to get this nice of a discourse on such a subject.
That being said, I suppose it's irrelevant what we think the law ought to be, the law does define the consumption of child pornography and therefore the facilitation of that consumption to be a crime, and by extension to be causing some kind of harm. However, all investigative agencies via undercover and covert informant based work engage in this sort of behavior, that either supports indirectly or prolongs unnecessarily some level of criminal behavior in order to infiltrate and stop a greater criminal syndicate from operating. This is not even remotely unprecedented, and, in my view is a fundamentally sound principle to follow. If you can prevent substantially greater harm (actual child abuse) by temporarily facilitating a very small harm (consumption of images of child abuse), you should do so.