Update, 5/11: In the wake of this controversy, Linden Labs has purged Second Life of those responsible for the behavior described below. Kudos to them.

More than six million people worldwide have found a way to live a second, more fulfilling life online in the virtual world of Second Life. Now some of the same seamy behavior that bedevils the real world is showing up in that world as well.

Now, according to The Guardian (registration required), German prosecutors are investigating virtual pedophilia, in Second Life, as some players have taken to engaging child prostitute characters in sex within the virtual world. Sex with e-animals, they write, is also increasingly popular.

The issue of legality in the U.S. of such activities was muddied in 2002 when the Supreme Court, in Ashcroft vs. Free Speech Coalition, struck down a law prohibiting the sale and distribution of virtual child porn as a violation of First Amendment rights, as long as the porn is not based on a real child.

The issue of illegal and/or immoral behavior of avatars in video games such as Linden Lab's Second Life came to public dialog with the release of Grand Theft Auto III in 2001, in which a player can steal a car, pick up a hooker, have sex with her, then kill her and steal her money.

A number of related cases are working their way through the court system today, one or more of which may eventually establish the boundaries for this and other virtual content.

At the moment, however, I suspect the question will be, what will the public tolerate? Certainly, a child e-porn scandal will invigorate a great deal of opposition to unchecked virtual privileges. The controversy presents a huge challenge to Linden Lab's franchise game.

Second Life -- the virtual world that only exists online but which features real money and commerce -- has set up a shop on the world's most popular retail shopping site, Amazon.com. Second Life wants to use its virtual environment to actually sell physical goods via Amazon.com.

This is an unprecedented linkage between one of the largest online virtual worlds and the world's largest (physical) online retailer. Inhabitants of the Second Life online universe will now be looking for real-world money by setting up stores powered by Amazon.com, Inc. (NASDAQ:AMZN).

I have to imagine that anyone savvy enough to reside virtually in Second Life and build a community in that environment probably already knows about Amazon.com's role as a real-life provider of goods. But that's not what's at stake here.

Turning a "browser" into a "buyer" requires the right combination of mood and environment -- and Second Life inhabitants are by nature more tuned in to this than most.

As for Amazon, the 1.3 million citizens participating in Second Life ain't no small potatos. That a demographic ripe for mining. Now whether it becomes a fixture in Second Life will be left up to its members, as they are the ones who will continue to build the revenue-sharing virtual stores and write the scripts needed to integrate with Amazon's web services for third-party retailers.