As far as I know, as long as the servers aren't hosted in the US, there's absolutely no problem. At least that was the common knowledge back when Median was on D2maniacs server. We were able to host servers in Germany because of that.
I'm pretty sure that Blizzard knows very well about Median, since one of the designers of D3 claimed that they loved playing Median and that they were somehow inspired by it, even though that's quite an insult. Anyway, one of the devs of MXL mentioned that they were collaborating with blizzard at some point. Since I doubt that there will be something big revealed, and I'm pretty sure Blizzard didn't just give whist the sourcecode of D2, I assume they only asked Blizzard to use the Malthael scene for their Sigma trailer and that the collaboration stops at this point already. Either way: Blizzard knows very well about this mod and it doesn't look like they have taken any steps to shut down Median so far. And it's pretty unlikely that they will do something, considering that they would only lose the last few of their hardcore Diablo fans that way.
The interview:
► Show Spoiler
GamePlanet: Have you guys ever played any of the mods that you get for Diablo II, the likes of the Median XL mod? Have you heard of that?
Kevin Martens: Oh yeah, I played that like crazy! I love it!
GamePlanet: So have you taken any sort of inspiration from some of the changes he has made at all?
Kevin Martens: You bet! It kinda hit us a few months back, people started playing a lot of it and brought it in and we took a look at it. There's some things that people have done with that game that I think are exemplary. He's done an awesome job actually of monster placement and creating combat scenarios where monsters tend to 'bleed in' from the outside, and take a combat situation that at first seemed like it was something you could handle, and then suddenly grows into something that is way out of hand! And it creates these really awesome moments. He came up with some really novel monster abilities and skills and stuff. It's a terrific example of a mod.
A lot of people will look at Diablo changes that we make sometimes and say "if you do that you'll ruin the game!", and then here's an example of somebody who's changed almost everything about Diablo II, but somehow preserved the game, you know, it still feels a lot like Diablo II! Even though lots of things have changed, including the health system -- things that are like, totally taboo, don't change that or it's over! And yet they did it. So that's a terrific example of exactly the kinds of forward thinking that we like. I don't know how he got half that stuff in there! In fact I went back and I asked one of the original artists on the game, how did he do that?! And they were like, I don't know! (laughs)
Source:
https://diablo2.diablowiki.net/Median_XLEDIT: Couldn't find the quote where they admitted they were colaborating with blizzard, but here's another quote where Marco denied anything big concerning that colaboration:
viewtopic.php?f=9&t=20294&p=190878#p190878