But the problem is copy protection. As soon as you apply the crack, the game stops asking for the cd, without copying anything. Which means that all the info is already on your hard drive. But the copy protection program will keep asking for it, just to see if you have it.
I don't know all the legal issues, but as an example, X3:Reunion developers, Egosoft, released a no-cd crack together with their 1.4 patch. I don't know if it's illegal when a third party releases it, but I think it's debatable, since it's your game and you own the original disc. From that point of view, kitserver would be illegal, because it alters your .exe file.
If you want to be sure about it, though, do a little research or ask someone else.