I don't understand that conversation at all. Isn't our behavior restricted by our laws, no matter what country the victims come from? Can you rape someone, if their legal status is in question according to the White House? If not, then why would torture be acceptable?
In fact, Cheney/Addington might very well argue two things...as I understand it. In his role of the Commander in Chief, the President is not subject to domestic laws that would interfere with the execution of his duties. This is the power the Constitution gives the President to ignor those acts of Congress that HE determines to be in conflict with his duties. Something like no-one is above the law, but the President has an indipendent ability to determine what the law is, if it is valid and if it applies to the Executive or its agents.
Secondarilly, the argument is very much that you can do things to non-U.S. citizens that you can't do to US Citizens.
As Ziggurat pointed out...the Constitution only applies to U.S. Citizens. You can't torture US Citizens, as it would violate their Constitutional rights as well as statutory law. Statutory law that would allow a torture...say waterborading were specifically deemed not to be torture by Congress...falls if the Court deems that it violates the Constitution. I.E. the Court finds that Congress violated the constitution, for among other reasons, deeming that waterboarding isn't cruel and unusual punishment when it clearly is.
However, those same prescriptions don't apply to non-citizens. congress could, in theory than, pass a low banning use of Waterboarding against non-Citizens declaring it torture. The President, under the Unitary Executive theory, could than issue a signing statement to the effect that the law doesn't apply to any situation that the President deems in his capacity as Comander in Chief as interfereing with his ability to defend the country, collect intelligence, etc.
Courts have long ruled that aliens are not protected by the constitution. Most of the modern law on this originated during World War II and has subsequently been restated with regard to G'tmo.
So, Congress can try to make torture illegal and define waterboarding as torture. The president can (and seeminly is) defy that by determining that a). they're not doing it, enough said; b) it isn't torture to begin with, so it doesn't violate the law, and we've got a memo from Al Gonzales to that effect that it isn't torture; c) It is torture, but they're not US Citizens so they aren't subject to the same protections, and the President in his Constitutional capacity as Comander in Chief can apply (read: ignore) the law as he sees fit so long as it is in line with his interpretation of the Constitution, the law and his duties.
In short, what the White House is pretty close to arguing is that the President is if not above the law, not subject to the law. It isn't that the President can break the law, it is that the law can not apply to the President as a co-equal branch of government.
It is a pretty neat trick actually.