As you know,I'm the developer of 6tag, an other instagram app but I'm independant in this story, I don't personally know these developers (of 2insta and inpic) BUT if I ignore that I'm a instagram app developer, here is my opinion of a simple windows phone developer and windows phone fan.
There is a huge difference between reverse engineering to study algorithms/securities and reverse engineering to copy/paste competitor source code. Moreover, this function is not an related to instagram API, it is just a html parser, it takes a html source code in input and output a summarize of the information in the html. So it is a copy/paste of a feature of the application, not of instagram, so forget about instagram in this story, it is just the story of a developer who discovered that an other developer stole his property.
I checked the two source code and this function is just an example, there is other copy/paste in the code.
So, in my opinion, it is really not cool for 2insta and a very wrong move of inpic.
Other thing: I don't understand what Instance do here, it is only a story between InPic and 2InstaWithMassiveLove
I know that developer stuff is complicated, so to make an analogy , it's is like if someone created a windows phone website.
* read wpcentral articles and be inspirated to write their own articles: not good, not wrong, grey zone
* Check the html source code and copy paste JavaScript & html to create it owns website: totally wrong