I'm pretty sure this sort of legalese is required for them to be able to offer an API that third-party clients can use. Otherwise, Twitterific, TweetDeck, etc. would all be committing massive copyright infringement everytime they displayed a tweet.
Yes, the way it's worded now is ugly and contrasts with the image Twitter seems to like to foster. It should have at least one limitation/stipulation, ideally in non-legalese.
It's not just Twitter - the language in their revised Terms of Service are also in the Terms of Service other similar web services; Facebook, WordPress.com, Blogger, Tumblr, Posterous, etc, etc.
http://garrickvanburen.com/archive/terms-of-services-kinda-l...
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