As long as whoever created the modified copies legally purchased the 1000 originals, I don't see a problem. It might actually make the Passion of the Christ watchable...
Yes, but that same person is not allowed to sell those 1,000 copies or distribute them or broadcast them or duplicate them.
If I buy 1,000 copies of a movie, I am certainly able to resell each and every single one of those copies.
Yes, they can. Stores everywhere around the world do the same thing on a daily basis. They buy raw materials, create something from it, then re-sell it. It is a fundemental principle of business.