macd21 said:

The greatest objections seem to be over genetic splicing with Xenos (there's a whole heretical faction mentioned for that one), and inducing mutation. Since the human form is holy, so the Emperor doesn't want you to go adding tentacles, or a set of gills, to it.

But entirely illegal? Well obviously not, otherwise the Genetors and others wouldn't even exist (because the Genetor studies human anatomy and genetics as much as Xenos). While hypocrisy abounds within 40K, it'd be hard to argue against the theory when we have so much evidence to the contrary. Starting with the Space Marines, who argueably get a pass because the Emperor created them himself. But others, such as the Gland Warriors, a wholly successful 'design' of genetically modified human. As well as the less successful Afriel Strain, cloned regiments of soldiers made using the spliced together genetics of many of the Imperium's greatest heroes (from Chapter Approved, they were Guardsmen with Know No Fear, and very bad luck).

While office politics is certainly likely to play a part, even a big part, the real big determiners are probably the things I mentioned above. Messing with the base human form, and/or trying to make it more Xenos.