Is TBO an airworthiness item or just a recommendation?
Unless there is a TBO Airworthyness Directive for that particular engine/airframe/serial number, it is not illegal for GA operations to fly beyond TBO. I can't find an example of a TBO AD but I do remember seeing some.

TBO is a manufacturer recommendation for that particular engine, and does not have any legal enforcement with the FAA. An engine that is well cared-for and has good compressions and clear oil screens (along with other positive inspections) is perfectly fine to fly beyond TBO. There are even stories of people flying 1000 hours or more beyond TBO.

Here are some good reads from around the web:

The Savvy Aviator - Debunking TBO
AOPA Engine Overhauls
Aviation Law - Flying Past TBO, Negligence or Smart Economics

In any case, flying beyond TBO is controversial. Some say that an engine near or over TBO is less likely to fail than one that has been recently taken apart, or at least less likely to fail suddenly.

The key aspect though when buying used aircraft is you don't know how the engine was treated in its run up to TBO. Was it shock cooled? Used for training? Operated out of a grass strip? Poor maintenance? Flown rarely? There are way too many conditions to consider when buying an aircraft near TBO to make the judgement of going beyond it safely or not. The only person who can answer that question is an A&amp;P. That is why TBO is tied so closely to the value of an aircraft. Engine overhauls are expensive, running $25k or more.