If that is the case, then I agree that that is fair use. But I see that as different from fanfiction. If you don't, I don't want to get into a detailed argument here about what the difference is. But, in short, if the primary purpose of MoR were to serve as commentary on Rowling, I would see it as fair use. As it is, however, it seems to me that that isn't the primary purpose of MoR (although it does do that among other things). Primarily, MoR is another great and compelling story by Eliezer Yudkowsky, but which happens to have used J.K. Rowling's universe as its setting in order to take advantage of the popularity of the Harry Potter books in order to attract readers. Now, I don't think there's actually anything inherently wrong with that (and even if I did, I would make an exception for MoR because it's just so damn good) but it is my empirical opinion that current copyright law is in fact (unfortunately) designed to make this kind of thing illegal.

I don't think that's quite right.

MoR can be construed as parody of Harry Potter - in fact, a lot of reviewers point specifically to where it pokes fun of holes in Rowling's worldbuilding, and (as noted elsewhere hereabouts) a major theme is the reversal of Rowling's stance on death.

But that's just a special case of transformativeness:

Transformative uses may include criticizing the quoted work, exposing the character of the original author, proving a fact, or summarizing an idea argued in the original in order to defend or rebut it. They also may include parody, symbolism, aesthetic declarations, and innumerable other uses.

In practice, it lets the courts say "I would make an exception for MoR because it's just so damn good".