I did... Until the police knocked on my door. They said I was lucky because they decided to ask questions first, but they technically could have siezed every computer in my house without warning. I don't think you'd ever get convicted for something obviously done over tor, but having your stuff taken while they investigate is really inconvenient.

People who accept the fact that they will have to explain to the non-technical police that they are not the ones who did something bad and they're only the exit-node operators. And, of course, the three-letter agencies.

Not Sure Actually.

That probably depends on your vps provider (if using vps). Hosting exit node at home is clearly a bad idea.
Check this (mind that this not have to fresh enough): https://community.torproject.org/relay/community-resources/good-bad-isps/

• The entry node doesn't know what data is being transmitted (or from where that data is) only who it's being transmitted to.
• The middle nodes know nothing about the data and just know the previous and next hop.
• The exit node knows what data is being accessed (if it's not being accessed via Https) but not who is accessing it

So in other words: no, you're not transmitting unencrypted data

would an outsider be able to tell that I'm transmitting something illegal to a person accessing tor?

No, because if that was possible, law enforcement would set up quite some of those and catch some bad guys