Ankesh,

As you mentioned Many have done it in some form or another, so I guess it all depends on who you ask...

And should the Ad copyright belong to the Advertiser who writes the Ad or the Publisher who usual owns the actual publication, web site etc...

Google's policy on copyrights pertains to website content and can apply to ads...
http://www.google.com/adwords/learni...ext/19473.html

Ad copyrights...
http://www.google.com/search?hl=en&c...Search&m eta=

There are a few different Ad related Spins and Flips going around online/offline...

Just one example...

Unlimited possibilites for those that have those Creative and Innovative ideas...

And willing to "quietly" Test particular Legal issues... Maybe nothing to worry about...

If you don't take Action and Try unique & “twisted” stuff you'll just never know...

Although the following business model Hasn't become a booming success...
http://www.sowpub.com/forum/showthre...=funny+ppc+ads

Phil