I don't know about "illegal", but it is, to me, a more serious violation of the license than installing on an unapproved system. The upgrade price assumes that you have previously paid for a full license. Since I am a commercial software developer, I take a dim view of what I consider cheating a developer out of the license fee.
Myself, I paid full zoot for the "Box Set" even though I know I could have saved a lot of money and bought just the upgrade. (I could have saved even more by downloading a torrent...)