http://www.wwmeinc.com/mm5/merchant.mvc?Screen=PROD&Store_Code=wwmeinc&Product_Code=USM171&Category_Code=10-990-100

I have just bought this item (the whole set with presentation case for US soldiers) and was wondering about the legal status of awards granted to US military personnel by the former South Vietnamese goverment, as it no longer exists and we now have diplomatic relations with the current government, which invalidated these awards.

Current Army Regulation AR 600-8-22 dated 11 December 2006, still authorizes Soldiers to wear the award. See page 126.
http://www.army.mil/usapa/epubs/pdf/r600_8_22.pdf

Received the medal in 1968 and still display it with my other medals. On my DD 214.

Thanks for the info, but a related question:

For a current serving US soldier with such decorations, if he had to travel to Vietnam on official military business, would it be proper for him to wear such decorations on his uniform while he was there?

I don't think you will find any Military personnel in Vietnam in uniform. If we did and you were authorized to wear the service medal you would. You don't actually wear the medal but rather the ribbon.