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Answers: When a show comes on Japanese TV, someone records it off TV, and ads their own English subtitles, then distributes it for free. Is that illegal to download?

I would likely buy it, but it is not available to buy, only to download for free.

Is this a punishable offense?

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Selling Anime content requires licenses which are difficult to procure, Most anime producers encourage free download of subbed anime as it increase the viewership of an anime by almost a 1000 times. This in turn increases their revenue collected in terms of sponsorships. Additionally this opens up an opportunity to dub series in other languages which can bring in additional revenues if animes become popular outside Japan.
Thats why you would se explicit statements in anime episodes saying Free Fan Sub not for sale or ebay.
Not all animes use this route. For example One-Piece once it became popular was licensed in US hence it is illegal to download that anime in US.

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I would say, just download it if it's not for sale. I think its legal if u download with the right tools like megaupload or rapidshare or ... because some pay for those tools meaning also for the product. I could be wrong but if u can't buy it download it. you don't need to pay for youtube so why for those.
Ok, bittorent is illigal.

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I think both the guys above make good points.
Fansubs are completely legal to watch and download (but not to sell) until the show or movie is licensed for international distribution. Until they are licensed, they are legally much the same as a home or amateur movie. Once licensed, the fansubs become illegal (technically illegal that is -nobody is going to bill you for continuing to watch a show you downloaded last year).

If it weren't for fansubs, I might never have watched Karin, Sister Princess or Ah! My Goddess - and I bought a complete boxed set of A.M.G. I love fansubs, they often have better and more accurate subtitles than the official DVD releases.

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