Instead of chasing ARRI maybe they could've charged forward with the little guy market they had created as best they could instead of purposely crippling the abilities and usability features of all their DSLR camaeras. They could've had that dominated beyond dominated, but instead as soon as they realize they had something, they tried to cripple it, move stuff up in price and play market segment games and as of now, at least, are just another high-priced also ran.
No, if that was their plan Magic Lantern would be buried under a sea of cease and desist notices.
Canon replied the question about ML voiding the warranty by saying (paraphrased): "Installing third-party firmware on top of Canon firmware does not void the warranty. The warranty is only voided if it can be shown that the malfunction to be repaired under warranty was directly caused by the third-party firmware."
That's a pretty vocal word of support from Canon for users of ML. I think the way ML works suits Canon just fine, it doesn't threaten their higher-end models, because most people will still rather pay more for their cinema models rather than risk damaging their camera, and if Canon gets their lower end cameras into Hollywood, what better advertisement for their suitability for professional video than that. It's a win-win for Canon, they have nothing to worry about.
Overpriced Arri isn't Canon's biggest competitor in the cinema market, RED is. Used RED Ones and new Scarlets are direct competition to Canon, they're also digital and in the same price bracket.