I will point a few issues with this whole discussion:
1) We have a Twitter thread, from one party, emotionally connected and clearly not unbiased
2) What the threat claims makes no sense. It might be correct -- court often rules in ways which make no sense -- or it might be misrepresenting things significantly.
3) Authors' rights are a cultural construct, and the extent and places protection extends depends on culture. The US has done a lot to push its own model of copyright on the world (and to educate kids that it's the only model of authors' rights and a human right). I would like to see more diversity and innovation globally here.
I don't fundamentally see the court's decision as either correct or flawed without a lot more context and primary sources. My instinct is the same as everyone else's -- this feels like infringement -- but I'm situated in the same cultural context.
My instinct with just a few more changes would be different.
If the folds of the dress, arrangement of flowers, and strands of hair were not placed the same, I'd consider the new work a sufficiently new work to not be infringing. Fundamentally, I'm a fan of building off of other's work and various forms of "resampling," so long as the result is sufficiently derivative, unconfusing (e.g. can't be passed off or confused for the original artist), and doesn't compete directly with the original work. I support a very broad interpretation of fair use. I've also been in countries where copyright is ignored, and where it's draconian, and I can tolerate other perspectives.