http://www.mvamaryland.com/Resources/DL-197.pdf
Utility, telephone bill or cable/satellite TV bill*
Residential rental contract (apartment lease or other rental of real property)*
Major credit card bill
Residential service contract (refers to services performed at the address of residence; for example, TV repair, lawn service, exterminator contract, cable or satellite television)
Court Order of Probation, Order of Parole or Order of Mandatory Release
Canceled check with imprinted name and address*
That penultimate one about probation is pretty funny. Bank of America and Chevy Chase Bank are in on most of the rest.
Ok, so you bring a foreign driver's license and a foreign passport to satisfy the "Primary Sources" requirement. So... my guess is right, if you use the foreign driver's license and foreign passport, you would not need any INS documents to back those up.
For the "proof of residency" you can then bring any rental contract, credit card bill or utility bill. As these proofs of residency can be easily had by an illegal, that would be how they'd get in. I think I am understanding it now.
FYI - I'm not an illegal. :)