Skyrim is a part of the Empire, so the duel wasnt legal. It was just a murder.
That is to say, it's murder when the Empire decides to enforce their laws because doing so is advantageous to them, but perfectly okay in other situations already noted in this thread where they don't see fit to enforce them at all. Either that or the law that makes "death by duel" illegal doesn't actually exist and the Empire is declaring it murder simply because it suits their needs to do so.
Also, Ulfric had the power of the Voice. That is like bringing a machine gun to a knife fight: not even remotely "fair combat". That makes it a dishonorable duel, and therefore Murder, even by Nord tradition.
Well sure, when you put it that way, how unfair of Ulfric to train in secret and learn to Shout so he could smuggle the Thu'um into his duel with the poor unsuspecting Torygg... oh wait that's not what happened at all. Everybody knows Ulfric can Shout, it's not a secret, it's a documented fact, he used the Thu'um in Markarth 25 years ago.
If you accept a challenge to a knife fight believing that the only weapon your opponent has on him is a knife, and you've agreed to "knives only," and then he pulls out a hidden gun in the middle of it and shoots you... well, then you've got a reason to complain.
However if you accept a challenge to duel to the death with a person who you know damn well is toting around a machine gun, and all you have is a knife, and you accept the challenge anyway and don't make it clear going in that the fight is going to be knives only for the sake of fairness, and you get shot and lose, then... too freaking bad. The time to set the rules of the fight are before it starts, not after you lose and want to whine about unfair it was.
AFAIK there is not one single reference in the game to the notion that Ulfric using the Thu'um was "illegal" or that he violated some rule about how traditional duels are carried out or that he violated the terms of that specific duel he had with Torygg. Oh, they don't like the fact that he challenged Torygg, and they don't like the fact that he won and Torygg is dead, but not once have I heard even his most vehement detractors hint that he cheated or broke the rules by using the Thu'um.