Yes and I'm sure China's been fine with it for the past few decades, it's only recently they're getting a little annoyed. Now the PRC have some leverage and say on the US selling weapons to Taiwan, compared to a few decades ago.
I mean it's not like the US doesn't know this is a red line, and everytime they cross it military relations will be broken off -- I wonder if Gates has a significant say in whether to sell off weapons or not, and I still can't tell if he really does want good relations with the PLA.
(I'm also surprised the Chinese side hasn't said something along the lines of "the weapons you sell to Taiwan are altering the military balance in the strait -- you give the Taiwanese the potential to call for formal independance which will lead to conflict. Our weapons are a deterrent for that conflict and you are raising tensions which we will have to respond to. K thx bye")
No they were never "fine with it", it's just that all those years they can do nothing beyond verbal protest about it. And US know that as well, just that it's all in the powerplay of which little to no penalty to the US. But with the modernization thus far China is not only neutralized whatever advantage Taiwan possess in terms of quantity but in quality as well, in addition when China can do so on its own Taiwan relies heavily on imports. What's more, with something like long range cruise missiles using Beidou "C-GPS" precision guidance, that's an angle Taiwan has yet have an angle to deal with.
So if and when fight breaks out, China finally has a good odd of wining it. What Taiwan could do, therefore, is to do whatever in their power to make US not forsake them. To that end, US need to "collect protection money" for it - just consider the arms sales are the "protection money".
And while they'd never officially admit it, keeping Taiwan "as is" for the time being is at advantage to China, administratively and politically, until the tide of fortune changed enough for Taiwanese to see the advantage of putting their chips on China.
So pretty much Taiwan is no longer "a goal" for the PLA but a contingency to be dealt with one day (KMT is likely to lose the 2012 presidential election, the leadership is just too wimpy), their current goal is to match the might of Japan and to secure the waters of South China Sea, a strategically important region that includes China's commercial shipping lanes and resources required for its economic development.
