> then while the original image would be copyrightable the resulting derivative output would not.
Excellent! I'll put the Inheritance Cycle through a synonymiser, and have a copyright-free (if somewhat degraded) version. Take that, Christopher Paolini!
… wait.
What you say might well be correct: the law is often foolish. But I'd imagine the creativity-free derivative work still counts as a derivative work of the original, copyright-eligible work.