First of all, IANAL. But you don't need to be as the laws are quite clear.
If it was my shop, I wouldn't be selling the GP2X's. I'd probably be recalling the ones I sold, and sueing my suppliers for fraud and sue them for damages (all the lost money in shipping + lost goodwill). I'd also sue any other distributors that are still selling unlicensed copies, as they are competing in an unfair way. I wouldn't be very popular, but at least not breaking the law.
I understand that to be successful, you have to look at all possible courses of action, and pick the one that will give the least amount of loss (where profit is just negative loss). So it might make more sense to just 'screw the gpl, sell the thing now, worry about license issues if/when someone ever bothers to really file a complaint; I'll be in Brazil by then anyway'
You probably wouldn't get anything out of sueing GPH/DignSys, as they'll just go bankrupt and leave you with nothing (or maybe you and the other creditors get to divide up their assets, (designs of gp2x etc)). You stand to lose a lot if GPH goes bust at this stage; maybe more than you would if anyone ever does challenge you in court for distributing unlicensed software.
If you just stop selling gp2xes, you lose a lot of potential sales to less scrupulous sellers. You can still be sued by anyone who already has a gp2x bought from your shop, or any of the copyright holders.
If you just start selling the devices again, with every gp2x sold you increase your potential loss... All it takes is one unscrupulous competitor, e.g. Sony, to get the ball rolling...
My reasoning why what you're doing is against the law: the official license is what counts and it is unfortunately quite clear, as it was written to be able to be understood by non-lawyers.
Below is the relevant actual text of the GPL (full text is here:
http://www.gnu.org/licenses/gpl.txt)
ED, as you're commercially distributing GPL based work, you must do one or more of options a),b)&c).
c) is not applicable (commercial distribution)
a) is not possible (you don't have the source to distribute along with it)
b) is what you're trying to go for,
but you'll not be able to deliver. Notice the word
corresponding? Because of the way dignsys has (appearantly) mixed incompatible licenses (oops, see clause 7: not allowed to distribute Program at all in that case), they'll never be able to give out the
corresponding source. This option is meant to allow you to save some money because you don't need to send a disc with the code with every gp2x, that most people would just not use.
You can argue that just giving the offer to provide the source (and never provide it when asked) complies with the letter of the license. You'll probably not be in the boat for not abiding by the license in that case, but I think here in Europe the consequences of breaking the laws against fraud (which that would be) are even worse than copyright infringement...
Now, we all know the real culprits here are DignSys, and GPH. DignSys for mixing the code and then releasing it to GPH without telling them clearly enough it was just supposed to be for internal use, not for distribution to the general public, and WHY this was so. And GPH for releasing it anyway, without doublechecking if they could, all the while saying 'it's linux', implying licensed under the GNU GPL, implying availability of corresponding source. But, you're in violation too, and an easier target, as you're in Europe, and not in far away Korea.
3. You may copy and distribute the Program (or a work based on it,
under Section 2) in object code or executable form under the terms of
Sections 1 and 2 above provided that you also do one of the following:
a) Accompany it with the complete corresponding machine-readable
source code, which must be distributed under the terms of Sections
1 and 2 above on a medium customarily used for software interchange; or,
b) Accompany it with a written offer, valid for at least three
years, to give any third party, for a charge no more than your
cost of physically performing source distribution, a complete
machine-readable copy of the corresponding source code, to be
distributed under the terms of Sections 1 and 2 above on a medium
customarily used for software interchange; or,
c) Accompany it with the information you received as to the offer
to distribute corresponding source code. (This alternative is
allowed only for noncommercial distribution and only if you
received the program in object code or executable form with such
an offer, in accord with Subsection b above.)
The source code for a work means the preferred form of the work for
making modifications to it. For an executable work, complete source
code means all the source code for all modules it contains, plus any
associated interface definition files, plus the scripts used to
control compilation and installation of the executable. However, as a
special exception, the source code distributed need not include
anything that is normally distributed (in either source or binary
form) with the major components (compiler, kernel, and so on) of the
operating system on which the executable runs, unless that component
itself accompanies the executable.
If distribution of executable or object code is made by offering
access to copy from a designated place, then offering equivalent
access to copy the source code from the same place counts as
distribution of the source code, even though third parties are not
compelled to copy the source along with the object code.
