So the only real contention people have here is the source publication of the original image, right? Because AFAICT, the cropped image (as it's always been used in practice) is nor more or less offensive that kodim04.png from the kodak set.
Furthermore, why does the licensing matter? Near as I can tell every use of Lena, except for by a for-profit company, constitutes fair use. The image, every time I've seen it, has been used for non-profit educational work. It's never reproduced in its entirety. The use of the image for this image compression purposes has no impact on the original market for which the image was originally created. Does this not meet the requirements of fair use?
That all said, I agree that if their is a better images available for this purposes, those should be used as well, but that is an entirely separate issue from whether or not Lena should or should not be used. The happenstance provenance of the image is really the only controversial detail, and if we go back to the history of why it was used it was mere chance:
Alexander Sawchuk estimates that it was in June or July of
1973 when he, then an assistant professor of electrical
engineering at the University of Southern California Signal
and Image Processing Institute (SIPI), along with a graduate
student and the SIPI lab manager, was hurriedly searching the
lab for a good image to scan for a colleague's conference
paper. They got tired of their stock of usual test images,
dull stuff dating back to television standards work in the
early 1960s. They wanted something glossy to ensure good
output dynamic range, and they wanted a human face. Just
then, somebody happened to walk in with a recent issue of
Playboy.[0]
Put yourself back in 1973. Imagine all the different sources of high quality glossy images of a human face with high dynamic range you might have easy access to 41 years ago. I have a hard time thinking of content that would have been available at that time that would have rivaled Playboy. I have no qualms with people judging things from today in todays terms, but presentism [1] tends to rub me the wrong way. If you want to judge something, don't do so anachronistically.
Anyways, I want to re-iterate my main point, which you did not address:
If I were someone working on image compression techniques I
would probably have seen many many algorithms and their output
using that image so when I see a new algorithm and a new Lena,
I might look at the results and think "Hey, this is similar to
this other approach I am familiar with"
There is value in consistency/continuity. Starting to use the image of Fabio Lanzoni like Deanna Needell and Rachel Ward did is a "lossless" approach of dealing with the controversial provenance of Lena.
[0]: http://en.wikipedia.org/wiki/Lenna#History
[1]: http://en.wikipedia.org/wiki/Presentism_%28literary_and_hist...