While I don't doubt any of what you say, the people at the Target near me have been very good. My brother works there, but he had to camp in front of the store for 56 hours just like everyone else to get his hands on a PS3. Additionally, if you call the store they will tell you that they will have more in stock starting Sunday morning. I don't think they're concerned about their ad being legal. I think they're concerned about running an ad that suggests they have Wii's in stock when they really already sold them all.
I wouldn't sell to this lady just because she gained inside info about their back room and then made an ass of herself. My brother also knows that they have Wiis in the back room and they won't sell one to him either. Plus, he works Sunday so unless they haven't sold out by the time he goes on break at noon he will still be without one. They won't even let an employee walk up to the counter and purchase one if he's on duty. In other words, aside from the discount, they treat employees just like every other customer. And keep in mind that my brother works in electronics. He is standing right there ringing up Wiis for other people and he can't just scan one for himself before other customers have a chance to snatch them all up.
So, I'd have to say that in contrast to the Target in your area, the one in my area seems to be handling themselves very well.
When it comes down to it, Target is going to sell the same as many Wiis between now and Christmas regardless of whether they hold back their stock for a few days -- which is to say, they will sell every Wii they can put on their shelves. With that in mind, they can either sell what they have now and tell more people on Sunday that they're out of stock, or they can tell people they're out of stock today and sell more to people on Sunday. The difference between today and Sunday, though, is that today they haven't told anybody that they have Wiis, whereas Sunday's newspaper will contain a Target ad saying that they do have Wiis. It makes perfect sense to hold them until Sunday, IMO.