I too, am a lawyer, and I have practiced immigration law exclusively for 20+ years. I was following this thread for a while and got involved with other things but now that I see this (albiet a little late) I will set the record straight, at least on this aspect (though I have seen a lot of other half correct information here as well).

Generally speaking, in order for an alien to "adjust status" in the U.S. to become a lawful permanent resident (green card holder) the alien must have been inspected by an immigration officer and either admitted or paroled into the United States. There are some exceptions to this rule which I won't go into, but the major one is someone who is eligible for what is commonly referred to as "Section 245(i)".

Section 245(i) states that if an alien had a green card petition filed on their behalf on or before April 30, 2001 and were physically present in the U.S. on December 21, 2000, the alien can pay a "penalty fee" of $1000 (in addition to the regular application fees) and adjust status in the U.S. If the petition was filed on or before January 14, 1998 then there is no physical presence requirement.

Thus, it is certainly possible for an alien who entered the U.S. illegally to adjust status. It just depends upon then the process was started. Dependents of an eligible alien can benefit from this provision as well.

One thing I can tell you about immigration law is that everything does not always end up the way on initially thinks it will. There are lots of exceptions that can be exploited for better or worse.