Why wouldn't it be legal?  Do you need madcatz permission to make a game that plays with its controller?  They are third party controllers dressed in a large frame. 

If you actually watch the GH:WT videos, you'll realize that it's a HUGE upgrade. There are so many new features. It's like a mini music production kit.

I need an extra guitar so if anyone can confirm that a GH4 guitar will work with RB1&2 that will be great. Else I will pick up the RB guitar and that will work with GH4 and RB2.

Also, which guitar will be better? GH4 or RB2 one?

Guitar Hero 4, it will have a slider for different gameplay elements (but will probably not be usable in Rock Band and Rock Band 2), and it just looks cooler! =P

GTWT has 2 Hendrix songs and Hendrix DLC, theyve already shown they can compete. The Wii version will destroy RB and its gimped game.

I think I will prefer the 500-odd songs Rockband 2 will have when it ships.

I thought the Guitar Hero drum set had more pads.

Whether or not it sounds legal, it can be completely legal (depending on implementation) even without the following things that make it more legal (no matter the implementation):

 Activision has licensed longstanding patents from Konami. 

 EA/Harmonix did not license them for Rock Band. 

 Konami, as the holder of these valid patents that they have working tech out in the marketplace, is suing EA/Harmonix, who will almost certainly lose if they decide to fight it.

 Konami, for business reasons, also forsees a future in which all music games use a common interface, because as they are neither Rock Band nor Guitar Hero, they will be able to get very little traction in the marketplace if they try to roll out their own solution. 

 Therefore, they will make a condition of their settlement with EA the exlusive, royalty-free (to EA), worldwide ability to use the Rockband instruments for both Konami and those who license the patents from them. 

 Because Konami had a patent, a working technology, marketed and making money before Harmonix even existed, there is little to no ability for Harmonix to get around whatever restrictions Konami wants to apply if they want to continue being able to sell Rock Band - this isn't exactly a patent troll-type case where they haven't even made a product (which, by the way, often succeed or at least settle).

 In case you couldn't tell from the above, EA/Harmonix basically have no choice in the matter when it comes right down to it.  They can either allow people to use their instruments, or they can stop selling Rock Band.  As a business, they really only have one choice.

It cannot work. The game has 5 slots on music track for drum pads and one for the bass drum. The Rock and set only has 4 pads and a drum slot. Not sure how they will be compatible.

Apparently, you can add a cymbal to your Rock Band 2 drum kit... Don't know if it will work with the ones provided with World Tour's drum kit though.