Are there any basic guidelines?
Ride bikes, have fun, adult beverages for those so inclined.
Do I need/should I have a permit for this?
Probably, but not worth the effort, and the city probably give it to you
will the cops come for some reason?
Possibly. At the boston midnight crit last fri, the cops did come. You are on bikes so you can easily scramble to another location.
is this type of thing illegal?
Probably.
Oh, yea, the helmets necessary thing is lame. People are adults and can decide for themselves wether to wear one or not. Most people understand the risks involved with riding in an 'underground' bike race through a city. Let people make their own decisions.