And if you can't really do anything with your coins but have your coins, why would people rush out to break the law to mine them?

This is false. Miners will spend about the same amount of money they get from block reward to run their operation. Asymptotically, this money is spent to buy electricity. This is the result of competitive pressure from other miners. What you will observe instead is the same amount of electricity burned but with 10x less hash rate.

Not really. It wouldn’t stop, but it would decline substantially.

Smaller operations and hobbyists only participate because it’s worth money to do so.

Making Bitcoin illegal would kill the argument that it will eventually displace fiat, and relegate it to being used only for illegal purposes.

The incentive to mine a currency that can only be used for crime as a hobbyist would end up being low.

We will see, the trouble with Freakanomics, is that it had quite a few avoidable errors in it, so maybe it's not the best example.