First, street racing is illegal. Period. Drinking alcohol is not if you are of age. Drinking and driving is illegal (after a certain blood alcohol level is reached).
Illegal, legal, illegal. There is a difference and that is what makes the difference. As long as I can remember they have been able to take your car as well as your license for "illegal drag racing" on the street. It was not always so strictly enforced but it was always a chance we took when we did it. Of course we did not do it in the crowded towns, we always went way out into the country where we could be reasonably safe about it. The only people at risk were the ones in the cars. Taking the car for a first offense may be a little harsh dependant on the circumstances, but for someone convicted of say, assault with a deadly weapon, the police do not give them their gun back because they didn't actually kill anyone now do they? The potentially deadly weapon was used in the commission of a crime. It's gone. Of course there is a day in court where you and a lawyer make the DA prove you were indeed committing a criminal act at that time. But if they are trying to take your car they probably have a pretty tight case. In this case they had video of these two cars participating at several illegal street races over a period of several months of investigation. They were not taken for just "hittin it" at the stoplight.
The new twist is that they are using the cars confiscated on patrol. Some states have crusher laws where your car is crushed in front of you. Here, they used to be auctioned off to generate some revenue. But now instead of making a few thousand dollars for the county they are saving "more thousands" in an already tight budget by converting these cars for duty instead of purchasing new ones. So in effect they are doing what is in the best interest of the general public. They have used unmarked cars here forever. We know they are there. It's not entrapment.
Laws are for law-abiding people, which coincidentally is the problem I have with gun control laws. (They only apply to people who observe the law. Criminals, by definition, do not abide by laws.) Whether you see a LEO or not, you are supposed to abide by the law. Laws that do include speed limits, following distance, aggressive driving, etc. LEOs are charged with enforcing the law. So, no, if the unmarked car is used for traffic duty it shouldn't be just for catching street racers. Plus with the media coverage it's not like they are trying to hide the fact that they have these cars. I think it is an effective strategy. Now instead of watching their speed just when they see a marked car they will be watching their speed around blue Cobras and 350Zs.
The cars may not be marked and carry roof top light bars but they are well lighted. They are also visible when you would look at the car parked so undercover operations are not possible with these cars. But for traffic duty, it is pretty evident that it's not just a blue light sitting on the dash. The strobe bars and all of the extra lights are expensive so you could pretty much bank on the fact that it's not somebody just playing cop. How many people were killed in street racing connected events last year? I don't know but I bet it was still probably more than were robbed by blue light bandits.
There are a few things I do think are gray about this practice though. First if a car has been modified they can argue that the car is not safe or is even illegal to operate whether you were caught racing or not. I'm not sure how the law applies here. That's one of the reasons I keep mine as stock looking as I can to avoid that hassle. I do know that the illegal equipment they removed was not all of the performance mods. I think I read somewhere that the Cobra still has a pulley change and an engine management system. They did remove the nitrous system and replaced the converters to be emission compliant. Also, there could be a question of liability if the vehicle were ever involved in an accident. It was not factory equipped with a "police package" plus it was modified when it came into duty so was it suitable for service or was it unsafe and dangerous.
Lastly, back when I was in the military one of my C/O's told me that the way to hurt a person was to hit them in the wallet (referring to AR-15's). I agree. Although drug dealers may have paid for the stuff they have out of ill gotten gains they will not feel the loss like the average Joe who has spent time and hard earned money on a car that he could be proud of, but loses it just because he does something stupid on the spur of the moment. So in that respect it is a much more effective deterrent than a simple fine or impound because some people never learn. Look at a court blotter and see how many are there for driving without a license. I know one couple, both husband and wife, who have had their licenses permanently revoked from numerous moving violations when they were younger. They are both much older now with three children and they both still drive everyday. (I sort of understand why. They have to be able to go to work. If they didn't, they would be one more burden on the welfare system.) The husband gets caught every so often and has to spend a couple of weeks in jail but then he is right back out and driving again. He has a job that he can take the time off when that happens and it doesn't affect his money. Take a man's car for racing and he will definitely think twice about doing it again because you didn't punish the man, you punished his wallet.