My understanding is that it's illegal to buy, take div, & sell...

My understanding is that it's illegal to buy, take div, & sell instantly.  but that's never stopped anyone.
 
It is not illegal, it just means you’ll lose your entitlement to franking credits, which are (in most cases) subject to a 45-day holding rule (see link below).

https://www.ato.gov.au/forms/you-and-your-shares-2013-14/?page=11

Buy @ $35.  take $2 div fully franked, so approx $2.70.  Sell your shares @ $33.  claim $2 loss on your tax return - gain another 70c.  In the end you've lost $2 in stock price.  but gained $3.40 in dividends & tax losses.  correct me if I'm wrong. 
 
In your example, you would simply end up with $2 of taxable dividend income (with zero franking credits attached) and an offsetting $2 capital loss. So, there is no risk-free arbitrage there, as far as I can see.