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Google is not the Internet police. It's job is, and has always been, to return the most relevant result from it's index to the user. (World domination comments aside . . . . ) So the content of the site is really irrelevant.
Torrents are not illegal. The content uploaded to them, however, may or may not be. A similar scenario that just came up recently: a popular freelance site's entire provider database was scraped and placed on a European site, including details of all the provider's info without their permission. It was indeed indexed. Who's responsibility is it to control the content?
The hosting ISP.
Why doesn't google block Torrent sites from its search results?
1) Torrent searches are popular, therefore...
2) Google would loose market share in search (because Yahoo/MS would fill the gap).
To be blunt, it's a no-brainer! Also, whilst Google likes to patent its own ideas, it has never been overly concerned about the intellectual property rights of others.