The way I saw it, LeBron definitely picked up his dribble before making the step-through, and watching the replay (at about the :50 second mark) you can count the three steps he takes after he picked up the ball.
Not surprisingly, LeBron disagreed with the call, and felt that his 'trademark play' was a perfectly legal maneuver.
"You have your trademark play, and that's one of my plays. It kind of looks like a travel because it's slow, and it's kind of a high-step, but it's a one-two just as fluent as any other one-two in this league. I got the wrong end of it, but I think they need to look at it -- and they need to understand that's not a travel," James said. "It's a perfectly legal play, something I've always done."Just because LeBron has always done it, doesn't make it necessarily legal. We've all seen LeBron take that hop step many times before, but the question of whether or not it's legal depends on whether or not he terminates the dribble before taking that first step. In this case, it seems clear that the ball was picked up before he made the move, which caused him to take the extra step that resulted in the traveling call from the official.
Caron Butler had the best quotes on the incident, when he mentioned that he was surprised (and thankful) that the refs actually blew the whistle in that situation.
"I definitely knew he traveled, but I didn't know they were going to call it," Butler said about what happened Sunday. "That was one of them situations in which a great player made a move, good officiating, and they called the call. And I was like, 'Oh, man, there is a God.' "When you're the Wizards and you've lost 25 of your first 32 games, and you beat the team that keeps eliminating you from the playoffs year after year, I guess you can hardly blame Butler for viewing the call on LeBron as somewhat of a religious experience.