It is not illegal as The Powder Toy is licensed under GPL, which states that anyone may modify the program as long as they post source code. It looks like they have a bunch of advantages over regular PT, including window resizing, more precise velocity and pressure mapping, fluid movement, and significant performance upgrades. There is a link to the source code, which you have to compile.
The guy says the severs are gone and the developer stopped work. Maybe he has an old version? He also says remake, and make numerous referances the original powder toy. Anyone could work out that he did not make powder toy.