Excellent analysis, particularly the key distinction between what Wu calls "adaptation" and what he calls "discussion."

Adaptation, however, isn't limited to telling the copyrighted story in another medium. It is one category of what the Copyright Act calls a "derivative work," which copies content from a copyrighted work and adds new, original material. The owner of the original copyright has the exclusive right to create or license the creation of derivative works.

Fan fiction that uses characters subject to copyright is a derivative work, even if it is in the same medium. As the Wind Done Gone case points out, there may sometimes be a defense based on parody/fair use. That didn't help the Air Pirates defendants, who put out a poster showing Disney characters doing various unseemly things (Mickey Mouse shooting up, e.g), or the people who put out a stage play that they claimed was a parody of GWTW. A fanfic story using Harry, Hermione and Ron (or Luke Skywalker or Captain Kirk) infringes the original copyright unless it falls within the fair use defense.

Much infringing fanfic is tolerated because i) it is given away rather than sold, ii) the quality is such that it is no commercial threat to the copyright owner and iii) it feeds the fan community that supports demand for the copyright work. But if Rowling chose to (and was willing to spend the money) she could chase down into the woods anyone publishing fanfic stories set in the HPverse.

This is pure speculation, but if there were a broadly successful piece of fanfic that took her characters where she didn't want them to go, Rowland's stated desire to keep artistic control over the characters would give her a good reason to sue the author.

"...if there were a broadly successful piece of fanfic that took her characters where she didn't want them to go, Rowland's stated desire to keep artistic control over the characters would give her a good reason to sue the author."

So basically she 'd be afraid someone could write her stuff better than she could?

Which is why Rowling wrote that annoying epilogue to the last book of the series: she does not want anyone, no matter how far into the future (after her copyright ended), to be able to write a sequel that would contradict her own ideas of what the characters' future lives would be.

Regardless of motive, the characters belong to JKR until her copyrights expire and they enter the public domain. She'll have the legal right to shut down anyone (other than a parodist) who tries to do things with them that she doesn't like for any reason.

The epilogue, it seems to me, doesn't go much beyond "they all lived happily ever after." One could imagine a rich vein of "Hogwarts: The Next Generation" fanfic, and there is a good deal of vagueness about the lives and livelihoods of the principal characters that leaves an open door. (Since the struggle against Voldemort is the equivalent of the victory in World War II, it would be intriguing to see stories of the Wizard equivalent of the 1960s as the spoiled, secure and therefore ungrateful children of the wartime generation hit adolescence.)

People have been writing Jane Austen sequels and pastiches since long before the internet. Once Sherlock Holmes entered the public domain, commercial novels and movies used the character. There's plenty of room, but for copyright, for people to do the same with JKR's work.