The guy is shameless. The original artist definitely has grounds for a suit. It's pretty obvious that Churchill simply traced over the orginal art and filled in the finer details so that it would reproduce easily through the seriagraph (silk screen printing) process. The mirror image aspect was probably a result of placing the tracing face-down directly on the screen when the emulsion was burned.
The original artist is dead, and so probably won't be filing a suit, though I suppose his heirs might.
The guy who bought the piece from Ward Churchill would seem to have grounds for a suit, for having been sold a fraudulent piece of 'original' signed artwork.
Or of using a solid projector to project the image onto another surface...