AI companies are most certainly making an effort to profit from the content they're deriving from copyrighted works.

That's not sufficient alone

you can take a movie still-frame and make an oil painting of it and it’ll be your work.

Maybe but not usually. This is making a derivative work. Derivative have their own copyright, but permission of the original owner is required to make them. In US terms, it might be fair use, if the painter wants to, say, make an artistic statement about consumer culture. EG Mickey Mouse has shown up in South Park episodes for the purpose of satire. That's fine.

OTOH, if there's nothing deeper behind the painting, then it's just unlicensed merch. EG, Disney has come down on day care centers for using their IP.

Whether the OP describes infringement is doubtful to me. No one owns the right to make pictures of EG people next to wooden dogs. On its face, there is no infringement.

Dual copyright is a thing, if your work is not sufficiently transformative (for example if you retain enough substantial original features that it's clearly recognizable) then it can be infringing if the original even if your changes is under your copyright.