I think this is quite complicated. I have mentioned this at the previous forum, but now that the topic is gone, I'll re-write some of it with new words and add some new stuff. Copyrights last way too long, and I strongly believe in "fair use". For example, when Timberland had ripped that piece of music from Tempest, there was a comparison video at youtube that really proved that it was the same piece of music. Of course, the video then disappeared from youtube, probably because the record company or someone else who held the rights reported the video as a copyright infringement. That was definitely fair use, and it's scary when the rules can be used to prevent good journalism (either amateur or professional).
I personally don't see a problem in using music from very known artists who have already made a profit from it (the use of "What is Love" in "Don't eat the Mushroom" is awesome) if credits is given, but the laws doesn't agree with me here, and I think we should stick to following them on this forum.
Using music from an unknown artist is something I definitely don't like though. The "big" artist's work is already recognized and liked for what it is by a large audience and won't be associated to a third party level to a small indie game like Knytt Stories just because it's used in one, but the small unknown artist might actually be hurt from that the wrong associations are made with his/her music and the rest of the content (and besides, it's easy enough to get in touch with those and ask).
I'm facing the same dilemma here anyway, I'm capturing this huge photo library that I will use for sceneries in a future game (it's around 1500 photos now), and at least half of the photos I'm capturing are objects created by other people, even including sculptures. If I had full respect for their rights to control their own creations, I wouldn't have been able to do this at all, and re-using and re-cycling can be part of a creative process too.
...but again, we'll have to stay legal on the forums even if we don't always agree with the rules