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Ok, so someone buys 1000 copies of the Passion of the Christ, adds in scenes of Christ uttering profanities and having sex, sells them, but destroys the originals. Fine with you I presume.

I see nothing wrong with that. If our current law prohibits that (and we'll see how the higher courts rule), then it should be changed. I should be free to edit any movie I buy in any way I like and to resell that copy. [Not change it and then make mass copies of that copy mind you (aka, a form of pirating). For each video I resold I'd have to buy an original from the studio and physically alter it. That seems like the proper balance to me.] These people, likewise, are buying movies from the companies, editing them, and then selling them. You can still buy Studio ____'s version of the movie from the studio itself. None of this diminishes the studio's profits, in fact, it may increase them.