But the GPL gives you the right to make derivative works. I highly doubt Sony did the same with respect to EverQuest. So I'm not sure how applicable that example is.

It only gives you that right if you are open with the software you distribute. The example is perfectly applicable to the question GP asked. It shows when you create a derivative work you are beholden to the upstream copyright holder, even if as in the case of the Sony kid your work is 100% your own effort and only references the upstream work for color. AVM might have copyright on the work they did, but as a derivative work upstream copyrights more or less trump their copyright. By violating the viral share and share a like bit of the GPL they may have lost their right to distribute their work, because it is a derivative work.

Absolutely nothing prevents you from making derivative works. You can write Everquest fan fiction until the cows come home.

Copying and distributing that derivative work is restricted, however.

True... perhaps it would be better stated as the GPL gives you the right to distribute derivative works.

I always thought that fan fiction lived in a legal gray area that was tolerated by some and not others. So in my opinion, it's a bad example to use in this case. GPL is very explicit as to your rights and responsibilities.

Some GPL projects sue for copyright infringement others don't. Does that make GPL violations a grey area?

It's not true that "you may not own the copyright to changes you make ... because the court may rule it a derivative work." You may not be able to distribute those changes without violating someone else's copyright, but that doesn't affect the fact that you own the copyright to your own work.

Consider what would happen in your FanFic case if Sony tried to incorporate the kid's changes into EverQuest. The kid could sue them for infringement.