To be clear: "transformative" not meaning merely "altered" but really meaning "repurposed"; if the new work is something people could feasibly use instead of the old work (harming the author's original market), it isn't "transformative".
Yes. For example, arfa ran into this question when launching https://thisfursonadoesnotexist.com/. Lots of furry artists had exactly the same concerns with his work there, but that work is decisively transformative.
Copilot seems ... well, less transformative. I'm still not sure how to feel.