Jeff, good point.
I can't speak for Keith, but I read him like he was more concerned with the artists' feelings than purely legal issues. I mean, if you think somebody's art is awesome enough to use as a prop in your game, obviously you want them to take it as a compliment (because it is) and not piss them off.
I've read and heard artists complain about their images being used as art on blogs, or being sold as prints, etc. without permission, and that sucks! I don't think too many artists would be put out by you printing their picture and making it talk in funny voices in the privacy of your own home, especially if you told them later how their art enriched your life by being in your game.
However, if somebody disables dling on flickr, for example, in order to deter the really lazy art thieves, and you post it somewhere else where it's easy to dl, you're kinda screwing them, right?
I imagine the best and most user-friendly version of an online AW picture resource would be a site that randomly selects portraits and/or landscapes from a database for you -- either singly or in small groups. So when you need a picture, you press a button, get a small handful, pick one, print it out, and draw on it. I'm thinking of a version of Abulafia for pictures, basically.
If this were something that was only visible/accessible to logged-in members, of this forum, or it's own members list, whatever, that severely limits the amount of lazy people who end up art-thieving, yeah? And because everything should be properly attributed, it might drive some traffic to the sites of those artists.
Anyway, that's an idea. I don't have the skills to make it happen, fyi.