There is no such thing as fair use, or shouldn't be. You either have permission to use a photograph or you don't. It's only common decency to ask permission before using a photographer's image. Depending on the use, be it charity or some other form of non-profit use then there possibly would be no cost to use the image, but permission might be granted. For someone to profit out of a photographer's image without permission, it is out of the question without recompense to the photographer/owner of the image. They are opening themselves up for a lot of financial hurt.
The guy in the blog said he tried to keep everything above board, even licensing the songs, so he does recognise the rights of the artist to his own work, but he never thought of the rights of the photographer Jay Maisel, who produced the image he was stealing, whether or not he altered the image. At the end of the post he has a number of increasingly pixelated renderings of the same photograph to which he says, "Where do you draw the line?" In my eyes if the image is still recognisable as an image produced by someone then you need permission to use that image, end of story.
Wonder what he would say if someone came along and finding his car sitting on the driveway, unlocked and with the keys in the ignition, drives it away and when caught the thief says 'Fair use, it was there and available'. I’m pretty sure he would expect the full power of the law to descend rapidly.