"Why the term "precedent" in this case? I was under the impression that legislative bodies are there to make law. Shouldn't concern about "setting precedent" only be relevant to judicial bodies"
Yes! Aren't we supposed to be able to go to our elected Representatives and Senators with problems, and if legislation is needed, they write it? And we are supposed to go to the judge and have them know what laws are available, and apply them to our case?
Sure, and if the law has unintended moral consequences the proper remedy is to change it through legislation (rather then the judiciary). Often this happens with an anecdotal case that grabs the publics intention such as the current one.
The only constitutional question in this case is whether this is the right legislature. More properly the state should have jurisdiction over such particulars (such as having alleged "guardians" held to some common sense minimum standards to maintain their legal guardianship) ...however in this case the Federal legislature has the enumerated constitutional power to define the jurisdiction of the federal judiciary, which they did not seem to step beyond. I don't see any dangerous "precedence" here. Heck, from a constructionist stand point I wish congress would exercise this power more often (such as limiting the federal judiciary from ruling on terrorist's appeals for habeas corpus).