It's fun to play in someone else's playground, which is why for my game I tend use skew fanfic'ish and send our characters to different worlds, just so they can experience new and varied flavors of, 'What the hell's going on now?!?' Still, that's just me having fun. I don't tend to read a lot of fanfic, because I like the author's original work. No one wants to hear my interpretation of Harry Dresden. That's why Jim Butcher deservedly gets the bucks, you know? He's the well, and my Parfums De Couer knockoff version can't compare. I don't care how good a fanfic writer is, it'll never be the original. Gaming in an author's setting is one thing. Writing about it is something completely different.
As for copyright, from what I understand it's not only fear of tainting the well, but also needing to keep the copyright strong. If I know my law right, then say Jim sees a really good Codex Alera fic and lets it go. Then, another author builds on that fic. Then, someone does an Alera/Dresden crossover. Years go by, and suddenly someone's publishing an anthology of all these stories. Well, he can't let them make money off of what is his intellectual property. His case in court will be weakened by the fact that he let it go for so long. Dresden and Alera are his babies. He's gotta protect 'em, even from the nice aunts who only wanna pinch their cheeks a little.