I think it's perfectly reasonable to restrict Legendary Pokemon. They have stats far superior to that of other Pokemon and amazing movepools to boot. They're great for using in the game to beat the Elite Four, or battle against your friends, or use in games such as Stadium and whatnot to fight your way through the ranks quickly, but in official tournaments it's necessary to ban Legendaries.
Mostly to keep things interesting. It forces players to rely on strategy and Pokemon that compliment one another instead of relying on the brute force of one or more Legendaries.
Just think, if Legendaries weren't banned in official tournies and online battles, everyone would be afraid not to use one, because it would be pretty much guaranteed that you would be coming up against one, and you want the firepower to be able to handle that.
And if you can use one, why not more? Why not a team of Legendaries? If Legendaries were allowed and it was a tournamant that allowed any Pokemon and combination of Pokemon, it would get really boring, because eventually the only way to win would be to have a team consisting of only Legendaries.
Legendaries have lots and lots of uses, but using them in official battles and tournies should not be one of them - it takes all the fun away.