Be more specific - which paragraph explicitly says that you can't modify a console you legally own? What you can't do is circumvent anti-piracy measures and that's not something you do in terms of homebrew which is clearly original code. Modifying firmware goes against the license, but not against the law. Similarly rooting Android phones or jailbreaking iPhones was recently made legal while unlocking them is still illegal.DMCA. Modding a console is illegal if you break any technological protection measures. And you do.
As for homebrew in school projects, my final IT project at Uni was a homebrew game for the DS and it was recieved with praise and top marks.