A fine story that is starting to get realy interesting.
I agree with you about the prophet but also understand that modern laws don't seem to stretch to the Wizarding world. To me they seem to run on a medieval system of 'Those in power, have it' and 'as long as it benefits and does not harm us, it's ok'.
If anything, the Wizarding World reminds me of a corrupt, isolated, south american dictatorship. The atrium at the ministry in the movie seemed to hint at that with the huge banners of Fudge everywhere, very 'Big Brother'.