Hmmm....this is clearly a tricky question.
I think rule number one here should be this: if I ever decide to take action because I feel a team has broken the rules, I would always bring it to the team's attention first, before involving inspectors. This goes back to what Ken said- respect is an important part of GP, and if I were on the receiving end of this, I would much rather have another team approach me (in a friendly way!) and bring the subject to my attention, rather than have an inspector come back after approving the robot because he/she received some "anonymous tip." This is FIRST, not America's Most Wanted. We're not out to get each other, we're here to help each other learn.
When should you mention a rules concern that you have? When safety is an issue, always. Otherwise, I guess it's up to you. Look at the example sanddrag gave us: suppose you're in that situation. You see a team that has illegal parts completely wound up in one of the most important components of their robot. Let's give the team the benefit of the doubt for a minute and say that just didn't read the rules carefully enough. You "blow the whistle" on them and they have to dismantle half of their robot. Maybe they are amazingly creative and they come up with something else on the fly- great. But maybe not. Now they have a drivetrain to put on the field. They can still compete but all those students who worked for hours upon hours and were really proud of the design are just a little heartbroken ...has anything good
really come of that situation? =/ I don't know.
Now, if the team in question had done all of this on purpose, knowing that they were cheating...I suppose this would become a different question, assuming that we had any way of reading minds. Now we're in really sticky territory. But suppose we know for a fact that this team was cheating. No matter how cool we think it is, FIRST still exists in the real world. Which means that some FIRSTers will cheat, and the fact that they are FIRSTers doesn't make the cheating any less uncool. Cheaters still need to be forced to follow the rules, no matter how much positive bias we have towards them just because they happen to be FIRST nuts too.
Every situation has to be taken separately. Should the first team have read the rules more carefully? Absolutely. But there's a big difference between screwing up and blatantly cheating, and there should also be a difference in how we treat each case. (Even though it should always be with GP.)