I really don't think there's a whole lot to say with regards to Fairey's methods and the subsequent response by the Associated Press - if it was just a low-level squabble between AP and a photo protected under Fair Use, there would probably be a larger discussion to be had, e.g. regarding "how far can you go with fair use until it becomes appropriation beyond the legalities associated with the media's original rights," "who truly owns an image that belongs to the creative commons," etc.
However, with Shepard Fairey's highly deliberate torch-and-burn campaign to try and obfuscate the legal missteps he took in order to produce his merchandise, it ultimately stripped him of any rights he may have had regarding the usage of the original photograph. There's a contrarian argument to be made in the hurdles Fairey had to go through just to use a single photograph, but again, he's no entry-level designer; someone so well-versed in production of commercial media should know the repercussions associated with copyright infringement.
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