The phone was sold. The finder made a profit from the phone he found, instead of turning it in to the police or bringing it to the owner.
So if Gizmodo say, talked to a source who committed a crime last Feb, THAT correspondence should never ever should end up in the hands of a prosecutors office unless they subpoena it and Gizmodo gets to go in front of a judge and move for the subpoena to be quashed.
For journalists, you have to subpoena items, not seize them. That's the important point now.
The DA's may or may not be allowed to see what giz knew and when they knew it about this case. But it's very unlikely they are allowed to know everything else on that hard drive, and they went about getting what they are allowed to know the wrong way (search warrant rather than subpoena).
Not if it's the journalists you're investigating because you suspect THEY committed a crime (in this case, purchasing stolen property). The police aren't doing this to find his source, they're doing this to determine how much Chen/Gawker knew about the phone being stolen before they bought it, and what they did about it once they found out.
That's what we suspect and what seems to be the case, but unless I missed an update, I don't believe the police have said what they are looking for specifically.
Does California state law, or federal law, mandate that you have to attempt to return found items? That would be news to a lot of people.
* http://codes.lp.findlaw.com/cacode/PEN/3/1/13/5/s485
* http://codes.lp.findlaw.com/cacode/CIV/5/d3/4/6/4/1/s2080.1