I think that under present copyright laws, Keir Smith's work "Oh so criminal" is indeed illegal due to the fact that he's filched everything in his work from other sources.
BUT I don't think it should be illegal because he's not presenting the filched material as it was originally presented and passing it off as his own - he's using the copyrighted material as his raw materials, like a painter with paints and canvas, he needs the footage and music to make his work and I think he should be allowed to. I think it's a very effective medium to make a political statement with - using images and persons recognised by a wider community helps to build his argument.
If he were making a substantial profit off of other people's work without their permission (and yes, I know that he put a lot of work into it too with planning and editing) then I think that it would no longer be fair use. All of this boils down to consent I guess. Unless copyright holders CONSENT to letting other people have fair use of their work, this kind of remixing/recontextualising is going to continue to be viewed as illegal.
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