As previously stated, soft-modding your Wii in itself isn't illegal. It totally voids your warranty, so it will be a no go trying to get help from Nintendo if anything breaks. If you use any kind of illegal software though via soft-modding, you are responsible for any charges if by some fluke, you get caught.
It has been said that in the U.S, making a back-up of your own copy of the game is legal. It may be a bit of gray area, it's unknown. Nobody has said that it isn't OK though that is important enough to take seriously, so we are gonna assume that it's fine, or at the very least, not totally illegal.
Losing the original copy for a back up though puts you in a place where you can no longer have that back up. It would be like backing up your games, then giving them away. That is not okay. You have stumbled into an area where you might as well have pirated it, which is very illegal.