"…"I think both sides are right" I mean that I think the pieces of art are completely different to the point of barely resembling one another, just the shape has been retained."

I think here both sides are actually right in this instance—and I don't disagree with you saying that the images ”barely resembling one another" but I would not go that far (as I think there is a significant recognizable resemblance).

That I disagree with you isn't the problem per se—as it'd be a damn boring world if we all agreed or experienced the same perception—rather it's that in cases like this the judgment relies on a subjective
analysis by the person(s) doing the judging and that everyone's subjective judgement is different, moreover, to further complicate matters, such differences are likely to alter over time.

Thus, if courts allowed it, this case could go on indefinitely with no one being adequately served. This is an obvious case where copyright law has broken down and it's clear the law needs to be changed.

It seems to me that royalties ought to be split in this instance but I don't want to get embroiled in a discussion about how the law should be altered as that's not the issue here.

Rather it's that we have to face the fact that current copyright law is broken in many areas and it desperately needs reform to make it fairer and less contentious. It needs more than just a fine tuning, instead it requires major reworking, and for that we need to bring a much more sophisticated and nuanced approach to the problem.

'Fair use' provisions are already under considerable strain by the hardened attitudes of many copyright owners—especially from large corporations, Sony, Disney, Elsevier, etc.—and tightening them further by a precedent in this case would likely have significant negative repercussions elsewhere. If the law is tightened writers and artists who don't have big pockets won't dare risk doing derivative works even if they plan differences that are much larger than those in this case and that will twart innovation (if the law becomes more restrictive then copyright holders are also likely to become more litigious).

There are also other issues that make copyright law unfair such as the unreasonable increases duration of copyright, excessive restrictions on the use of orphan works, the right to copyright works that are only trivially different to works already in the public domain and the absolute rights of copyright owners with respect to licensing—that is that copyright law does not acknowledge those who are in a position to copyright material are also members of society who, in many instances, have developed their talents at public expense (their education etc.) and in return they have some obligation to society (which implies that some form of enforced arbitration ought to be a part of copyright law).

I'm not advocating that rights holders not be paid fair dues for their works—clearly they should, but at the same time they should not be allowed to exploit consumers of copyright material as has so often happened in recent years.

The difficulty with this case is that a fair decision in this instance could likely result in a net increase in copyright restrictions which will only increase the unfairness of copyright law. It's why we need urgent copyright law reform—and that won't be easy given the many complexities involved.