legal "counterfeit" bill?

no...

Ok then, if that is the case the question becomes, how close could someone duplicate a government issued bill and NOT get in trouble if the bill had the words "NOT LEGAL TENDER" on it? Monopoly money is play money but it is made to represent currency. If you were able to get someone to accept it as cash payment I'm pretty sure you would not get in trouble. So at what point does it become illegal?

Then the crime wouldn't necessarily be passing counterfeiting money but one charge of fraud and one charge of larceny for stealing the item that one allegedly purchased.

Most stores will not authorize a sale of an item for obviously fake money. First, the cashier would be fired and still the original transgressor would have to deal with store's management in terms of perhaps shoplifting charges or some equivalent charges.

On the other hand, if you are dealing directly with the owner of the item or the store and they are obviously aware that you are indeed passing Monopoly money in exchange for the hypothetical item to be purchased then this issue would simply be an ethical one rather then a legal issue.

That sounds reasonable. By the way, I had no ideas of doing this. I just saw "Woz's $2 bill sheets - The Engadget Show" on Youtube... http://www.youtube.com/watch?v=LJ1TIYxm1vM and it made me wonder.

"So at what point does it become illegal? "

as soon as you attempt to pass it off as legal tender.

you are knowingly giving someone worthless paper as a good bill.

I suppose the court's test would be whether a normal person would be likely to confuse it with real money---by some standard for the terms "normal" and "likely".

Additionally, I guess a court might look at your intent for printing that bill. If you actually try to spend it, you're on the hook. But if Andy Warhol printed a series of "dollar bills" just to exhibit them in a gallery, that would probably be a different case.

I am not a layer, and these are just my idle speculations.