This is not the first time that Bob has 'borrowed' from outside sources for the sake of his art. In arguably the greatest album of his career, 2001's "Love and Theft", he rehashed a number of lines from the novel "Confessions of a yakuza" by Junichi Saga. To cut straight to my conclusion, I think Dylan knows exactly what he's doing. He has never cared what the critics think. The average fan will decide for themselves if they 'like' the compositions, despite any controversy. Also, any controversy can't do anything but ensure that a larger audience does indeed access the work. He does what he does for himself, and it just so happens that a huge international audience is eager to consume his output.
If you think of this series as the artistic equivalent of a cover album, it can be seen in a different light. Moral and copyright issues may arise, which is not something I'm about to get hung up on. People who are hung up on shit like that are not Bob Dylan fans. If Bob were to release an album of Muddy Waters or Hank Williams covers, as a fan, I would be ecstatic. Also, I quite like the paintings. I think they have something to offer, and I haven't even seen them in person!