Come on guys, why else would his thumb be there? It's such a telltale sign when some bloke is trying to rough up one side of the ball simply because there's no other reason to hold the ball like that (it's pretty uncomfortable). Guys who hold the ball that way are usually trying to dig the thumb in and whilst raising the seam helps quite a bit in getting swing (conventional or reverse), making one side of the ball far rougher than the other is crucial for reversing the ball.
Anyway, I'm on the side of the debate which says you should be allowed to maintain ball in any natural way you see fit so I'm largely on Shoaib's side. Don't see anything unfair in blokes roughing up one side of the ball using teeth, nails, spit, semen, whatever. Altering the condition of the ball to help you out, in my book, is very skillful bowling and I've never seen a coherent reason for why it results in an unfair advantage. That said, I'd advocate that if bowlers are allowed to do so, they fudge it and the ball stops swinging, they shouldn't be allowed to change it short of the ball smiling back at the bowler. Altering the condition of the ball is a skill, yes, but it's not and shouldn't be without risk that you're going to kill the swing you were getting to that point.