The part that strikes me most interesting is the: "incorporation of copyrighted material in another author's work under a four-factor balancing test"
FACTOR 1: What is the character of the use?
In the first balance test, there are certain attributes that make the balance swing to the OK side (personal use, non-profit, educational) and one specific attribute which is "commercial" that makes it swing to the not OK side.
FACTOR 2: What is the nature of the work to be used? Unpublished weighs against fair use. Fact base works weigh towards fair use more than fiction. Photograph I would consider fact based, but a drawing/painting would be more creative, which unfortunately, weigh against fair use.
FACTOR 3: How much of the work will you use? Using a smaller amount within a larger work would favor fair use.
FACTOR 4: If this kind of use were widespread, what effect would it have on the market for the original or for permissions?
I don't think scroll saw project would have any effect on the value of the original work regardless of how many in our community did this. (unless the art in question was sold as a pattern or scroll saw project)
For those of use that do not sell our work, regardless of the Fair Use, there would be low visibility and little financial incentive for anyone to take us to task for it. For those that do sell, it gets a lot trickier in that you are making financial gain on someone else's effort. Still, I think the scale of delivery would be so small that is would not draw the attention of the original artists.
I think if I were to sale patterns or projects, I would seek out images that are already free. For subjects that are not available for free, I would purchase a royalty free version from one of the many available sources. If you can re-use the image for projects which are sold over and over, the price per project for purchasing that right would be pretty low.
-Randy