Though copyright as it is has issues, this seems very off, as characters are the work, moreso than the settings and even plot - as only one of those three items tends to be unique. I've written books and stories, and the best answer I can give to you is this:

Those characters do not live in your head. They live in mine. I have full control in expressing who and what they are on paper for others to learn more about them. No one else does, no one else can say they did this or that because they don't have any control over my creations, my thoughts, my personal universe. To say someone else can just write with my characters is tantamount to violating an innermost personal space - indeed, it's intruding on one of the most personal forms of control and self-expression possible. You can't just create situations and settings for things that only exist in my mind. I want others to know, so I'll put out a public work. That doesn't mean someone can put something in my world, my character's lives, without my approval. Copyright is just a legal extension of that God-hood I exert over things in my head.

It is just too bad that the current form of copyright is far from ideal, as we've seen. I'm not against fan fic or other expression of still-in-copyright works either, I tend to like them and tend to agree that they do more good than harm, just pointing out that it does matter in some cases, discretion of the author should always be allowed, and just being well-known and popular doesn't magically make that control disappear. Being dead does though, so much of this doesn't really apply to the original topic, but felt I had to make a response to this.