In fact, the Rio's operation is entirely consistent with the Act's main purpose – the facilitation of personal use. As the Senate Report explains, "[t]he purpose of [the Act] is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, noncommercial use." S. Rep. 102-294, at 86 (emphasis added). The Act does so through its home taping exemption, see 17 U.S.C. S 1008, which "protects all noncommercial copying by consumers of digital and analog musical recordings, " H.R. Rep. 102-873(I), at 59. The Rio merely makes copies in order to render portable, or "space-shift", those files that already reside on a user's hard drive. Cf. Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 455 (1984) (holding that "time-shifting" of copyrighted television shows with VCR's constitutes fair use under the Copyright Act, and thus is not an infringement). Such copying is paradigmatic non-commercial personal use entirely consistent with the purposes of the Act. [1]
[0] 17 U.S. Code § 1008 Prohibition on certain infringement actions
[1] 180 F.3d 1072. 1078-1079. 51 U.S.P.Q.2d (BNA) 1115 (9th Cir. 1999)
So the law does specifically say that making digital copies of music for non-commercial use is ok and it has been reviewed by the judiciary (to some extent).
There is also 17 U.S. Code § 117 which allows backup copies or computer programs "that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful".
You can still get yourself in trouble related to the DMCA depending on what you are doing, but all of your assertions are false.