Are hoax web sites ethical and legal?

The more Marcus Gillezeau, talks about "Scorched", a Channel 9 telemove, at the Innovative Ideas Forum 2009, the less I like it. The TV show created a character "Cassy Hoffman" inspired by the Lonelygirl15 hoax. While a creative person might decide that such a hoax is okay as a work of art, it is worrying that this was funded by a government body, the Australian Film Commission. While it is one thing for someone to spend their own money creating hoaxes for commercial gain, it is not acceptable for my taxes to pay for it. Marcus was also proud of having carried a "faux" (that is hoax) news service. About the only saving grace of this material is that is is of the poor quality of the script, acting and production should make the more than casual viewer that this is a hoax.