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I might be stating the obvious here but using GPL licensed software and making changes and using them internally (like within a company) is okay. Google, Yahoo, Amazon and other companies does this and this is not a violation of the GNU GPL license. Also providing a hosted service such as hardened FTP server space (with patches whose source code is not available) also does not fall under the purview of the GNU GPL license. It is perfectly legal to do that.

It is only legal if the original package is licensed under the GPLv2 or earlier, which obviously it is. The GPLv3 tends to look at it differently as of now.

Here is what RMS said about it in FOSDEM (http://www.ifso.ie/documents/rms-gplv3-2006-02-25.html):

"One of them is the Affero GPL requirement that says "if you run this for public access, you must provide a command to download the sources". So the Affero GPL is the same as the GNU GPL version two but it has one additional condition which says if you put any version of this program on a public web server, you've got to have a command that the user can use to download the source of your version. So we were thinking of putting a requirement like that into the GPL version three, together with a way that people could explicitly activate it, but then I decided that it would be much simpler just to let this be a compatible licence and put this compatible licence on files that they're programming. So GPLv3 will not make this requirement, but it will be compatible with licences that have this requirement."

Regards, Debarshi