Thank you for your concern! However, since I happen to be the author of my avatar, which is original character artwork for an action RPG game I'm making, I am in perfect compliance with copyright laws.Hey, RedSlash, I think your avatar may be violating copyright laws- you'd better keep that guy under control!
As for the ethical issue, I would be in favour of fanarts and fanfiction although it is illegal. I think fanarts/fiction add to the value and creativity of a work (ofcourse to a certain extent though.. if you decide to turn my fav anime into some cheap porno, then I would be against that). I favour original fan artwork over work that was directly ripped off a dvd. However, if you were able to present the ripped graphics in a complete unique and creative way that would surprize me, then I would favour that too.
While I think most fanarts/fanfiction contribute to the author's work, you should keep in mind that it does not always benefit the author. There was a case with where a writer was sued by one of her fans because the fan claimed that one of the ideas in the author's book was stolen from the idea in a fanfaction that was submitted to the author. Unfortunately, the author lost the case and thus suffered losses.