Truthfully, I've had plenty of work stolen, from art, to fan fictions, and so on, and I honestly just shrug it off. I made that stuff for fun, not for popularity or for money. Case in point, if you don't want someone else using it, don't put it on the Internet. People ask me to throw images from DeviantArt in when they request from my shop, and I'm quite sure not all of them (if any of them) asked for permission first, but there's no way and I don't have the time to verify it each and every time it happens, although I do put a disclaimer that I'm not responsible for any consequences that person receives if they get caught and accused by the original artist. I NEVER claim I drew any of the pictures in my banners, unless I actually really did and get specifically asked. Besides, if the only reason people got into art was just to be praised and not out of passion, that's a real waste. A real artist that makes artwork wouldn't care if someone else used it for some other purpose, because they made it for their own enjoyment and not to please others. If you're only doing it for attention and for fanboys, that's just sad.
Another thing is, if this is true, then we shouldn't be putting any Pokemon pictures in our artwork, not from the anime, not from Ken Sugimori, not from the games, not from the cards, not the sprites, NOTHING. That's all copyrighted stuff, thank you very much. We didn't make those sprites either, we certainly didn't draw the pictures from the anime, and we're definitely not Ken Sugimori. And if you went by that dictation, you'd kill at least 98% of the art shops that exist on this site in an instant and you would have the perfect justification for no one to ever use avatars ever again. The only reason why I don't do my own character art myself all the time is it comes out really kind of cartoony. For some reason, I can't do "professional" shading in Photoshop because my magic wand tool ends up crashing it for some stupid reason. That, and I find line art to be really tedious and migraine-inducing. But if I absolutely had to, I could. I would have to kill off my shop, however, and I'm sure Mew_ would have to kill off hers as well, along with many of the other shops that rely on "official art" in order to fulfill requests. There's no way we could draw all the Pokemon people request to see in their banners each and every time, AND make the banners themselves. If I had to do that, I would probably only be able to make one banner a day, at most, and it would be a pretty grueling amount of work, if it isn't already.
Now, the thing with DragonMaster is he really didn't do very much with the image itself besides slap a few words on it, barely legible at that. If he asked for a grade, yeah, I'd have to give him an "F." Anyone can do that with their eyes closed. I think the better question to ask here is, should people be able to use another people's images as long as they're drastically modified and they're not the only image or effect being used, or should it be absolutely forbidden to ever use anyone else's art ever? And if the later case is true, then we're all in deep trouble.
That is the question I think we need to consider, and what's allowable and what's not.