If you're using your company's network, then they have every right to monitor all of the activity on it. They're trying to protect trade secrets, future plans, customer data, employee records, etc. from attackers who would use that information to do harm to the company, its customers, and its employees. If you don't want your employer to know what you're doing, then don't use the company computer or company network to do it. And while you may think that you're too tech savvy to fall prey to malware 1) not everyone at your company is, and 2) no amount of savvy will protect you from all malware, especially ones that gain a foothold through an unpatched exploit. And there's also that whole other can of worms: malicious employees.
I don't think so. Since when is it legal for anyone to circumvent encryption systems?
Is it legal for your ISP to do this on "their network"? Actually, I bet you think that's OK too.
This FindLaw article http://employment.findlaw.com/workplace-privacy/privacy-in-t... agrees that employers have a right to monitor communications from their devices on their networks, especially when this policy has been clearly laid out and agreed to by employees. Expectation of privacy is a major deciding factor in US law.
I'm not sure of the legality of an ISP doing this. I would hope it's illegal, but ISPs are weirdly regulated compared to, say, phone companies.