Actually it's legal in the UK for quantities under 2000 litres/year (after which you need to pay tax etc). However preparing it incorrectly can lead to damage to your engine (primarily due to 'gum' building up).
I have heard of people adding a small amount of 2-stoke non-synthetic oil to their diesel in order to improve the lubrication. I have no idea whether it works or not, but messing around with the fuel mix can cause damage so I don't plan to try it.
This is interesting, I know that in boating the newer Ultra Low Sulfur Diesel fuel has created problems from lack of lubricisity (sp?)for the fuel system and related components. The older generation diesels didn't have this issue. Using some 2 stroke oil might mitigate those problems. I'd be careful though and check with the engine manufacturer to ensure that you're not creating more problems than you're solving by adding different oils to your fuel system. Also, as MMUK points out, if you choose to go forward with this ensure that you're not using synthetic 2 stroke oil. I used to ride 2 stroke motorcycles and scooters and used a synthetic 2 stoke oil for a while in one of my Vespa's only to discover that it weeped through the fuel lines and made a huge mess that was a major pain to clean up and cost me a set of fuel lines to stop the leaks. It was great lubricant, but made my fuel lines leak and dribbled out of the exhaust in an oily goo rather than combusting.
I run all of the above in my truck. I add 2 stroke at a 200:1 ratio (non synthetic). I am involved in a restaurant that uses around 30L of veg oil a week and am able to recycle about 20L into my tank. I also retrieve around 20L a week of old engine oil that gets filtered and added to my tank. To keep viscosities down, I add paraffin or a bit of petrol.
We do not have any legal implications around these practises and can run our vehicles on just about any legal substance.