What I'm particularly intrigued by is the idea of derivative works cast in alternate universes as "literary criticism". My personal experience (as a reader of fanfiction) is that most AU fiction falls well short of the mark of true criticism. I know a number of writers who cast their stories as "meta commentary" on the source material, and I think those sorts of fics skirt the boundaries of criticism, but still fall squarely within the scope of "derivative work." This is probably why fanfic writers routinely fall back on the "transformative" part of the rair use argument. (In my opinion, most fanfiction is not properly transformative either, and I'm sure the folks at the Stanford Fair Use Project would agree. Heh). Fanfiction may ultimately be fair use for some other reason, but I doubt it will be because of a transformation of the original.

I've never heard the criticism argument before, and I'm not buying it now that I have heard of it. It seems like too elliptical an approach if one is really trying to offer come kind of serious critical commentary on a work. I agree with you in that most fanfiction isn't particularly transformative, either. In fact, I'd think fanfiction pretty much defines "derivative," since it starts with characters and scenarios already created and published (or broadcast, or whatever) by someone else.

an_lagat_glas said something once about all of medieval literature being fanfic, meaning somebody wrote the first version of the Merlin story, say, and then everybody else expanded on it because of popular demand.