They really don't understand do they?
The campaign is copyright infringement and the game isn't.
Not true. The game itself absolutely is copyright infringement.
All Touhou fan games, whether they follow ZUN's guidelines or not, are copyright infringement under the letter of the law, whether Western or Japanese, whether any guidelines are or are not followed. This is no less true even of something popular like, say, Labyrinth of Touhou than it is or was of Touhou Super Smash Battles.
The guidelines which ZUN has put forth - which are in no way an enforceable legal document - are essentially an informal statement by ZUN of "So long as you abide by the standards listed here, I will choose not to enforce my copyrights on your unauthorized derivative work", nothing more and nothing less.
The first reason being is poor understanding of doujin culture in general by those not heavily involved in it, especially outside of Japan. Doujin doesn't have a perfect equivalent in the West, but I'm sure as most people will tell you, they have heard of it being approximated to "indie", whether in translations, or elsewhere (Indie game expos), especially in any media targeted to a foreign audience. This unsurprisingly leads to a misguided approach of how to develop a Touhou game, since assumptions are made that whatever is okay in Indie culture is probably okay in doujin culture. As it turns out, crowdfunding, a rather recent phenomenon, isn't one of those things. Along with many other examples pointed out by you guys. Oops.
Correlating Western indie development culture to Japanese doujin development culture is a pretty poor correlation, yeah. I would actually say the closest Western analogues for Japanese doujin culture would be the culture of anime fansubbing groups during the 1990s, or more recently, the culture of ROM hackers, console game fan translators and vintage platform emulation enthusiasts; both the Japanese doujin scene and the Western ROM hacking scene are communities largely unified by creating what are, in all technical legal terms, unauthorized and illegal derivative works. Both scenes are largely fully aware that what they're doing is illegal, as evidenced by the general hostility of the doujin community to wide-scale distribution (because wide-scale distribution will attract unwanted attention from copyright holders whose IPs have been infringed by fan works). To a certain extent, this is even true of ZUN's Touhou work itself, since Reimu's design is sort of KiKi KaiKai's Sayo-chan with the serial numbers filed off (and as I recall, Sanae's color scheme is actually the 2P colors for Sayo-chan in one of those games too). So when ZUN refers to "typical doujin channels" or whatever the exact verbiage is, this is pretty much what he's getting at.
If anything, I'd actually say the classic fansub scene and the modern ROM hacking/translation scene take the doujin mindset to a greater extreme; from memory, charging anything beyond the base cost of the actual physical media for fansubs was absolutely anathema to that culture, and the Western ROM hacking/translation scene is generally extremely hostile to the idea of getting any money involved at all; for a long time, they were uncomfortable even accepting donations on a voluntary basis, though this has relaxed somewhat. For an example, I quote Gideon Zhi (webmaster of Aeon Genesis, one of the most prolific ROM translation groups):
Aeon Genesis is a loose collective of programmers, writers, and Japanese speakers. I spearhead the operation but by no means could I do this without lots and lots of help. As such I have been extremely hesitant to place a donate button on the site in the past. How could any funds added to the account ever be fairly distributed amongst all of the contributors? A few months ago, I hit upon the answer: a rainy day fund.
I'm still hashing out the details, but essentially we will have a private forum (possibly public-viewable) within the Pantheon wherein contributors can request funds. There needs to be a valid reason for a withdrawal from the fund. In my case, for instance, my student loan payments have dropped off in the past several months due in no small part to emergency veterinary bills, but this is a drastic example. The money could help finance a PS2 for Tyria so he could play the PS2 SRW games he's always wanted. It could go towards a pizza for a translator who's just finished a script, or who's motivation is flagging. It could help pay bus fare to help a contributor visit a sick family member. Stuff like that. Wide ranging, but not frivolous.
It's important to note that any donations made to the fund are strictly done as thanks for translations already released. We will not accept money for anything we have not produced, and do not want the pressure of someone claiming that they paid us for work that hasn't shown up yet. Furthermore, we will never withhold any releases due to lack of contributions to the fund. It would be nice to have an emergency pillow to fall back on, but everyone understands that times are tough, and I will not hold my work for ransom in this manner!
The wiki doesn't make things any easier. The document itself is on a page labelled "Touhou Wiki:Copyrights" under the subheading "Copyright status/Terms of Use of the Touhou Project", implying its some sort of legal document when in fact it is quite far from it. It doesn't go into any other further detail either, other than the link to the Wikipedia article on doujin, which doesn't do the culture justice either.
Second is harsh, and sometimes unfair criticism put forth by all sides. First, if a developer wants to move main communication channels elsewhere (Fb/Yt are very common examples; Tw in Japan; could be a separate site altogether for all I care), then why not? Just because it started in one place doesn't mean it must stay there forever. I sure hope you guys aren't like the Wikia which gave me headaches when I wanted to move my TL project elsewhere. Not like I can recall doujin circles congregating on some sort of common forum either.
As a wiki contributor, where good faith is assumed, there's also a lot of bad/poor faith assuming going on and about. You guys seem to demand every inch of proof and harshly point out every misstep from ideal, much like a cross-examiner would at court, Video communiques? Could be a blog post for all I care since both serve the same purpose - a message from the developer, plus room for comments underneath, only difference being inconvenience for the viewer if a transcript isn't provided. Refunds for contributors? Seems you missed the memo posted on other sites, including his more preferred lines of communication.
Doesn't exonerate the developers from fault either. As most people have pointed out, it would've helped to seek advice regarding doujin culture, and not to jump to conclusions too soon. You showed poor faith of ZUN, without considering the possibility that ZUN is simply reluctant to work outside of his comfort zone, i.e. doujin. It's not like he's some inflexible stick either, since he has been accommodating many times in the past (doujin anime even after guideline change being one. Also Fantasy Night). All that said, even in face of criticism, kudos for getting this far.
Haven't read such vitriolic comments about fan projects since the "Vampirish Night" case, and we all know how that turned out.
This makes an excellent point. As we start to get more people in the Western fandom interested in creating their own derivative works, I think it would be an exceedingly good idea to make sure that a (competently) translated version of ZUN's guidelines are prominently featured on the English Touhou Wiki to be found easily.
I do think there was a lot of bad faith assumed at various points, traceable primarily to the fact that the situation was spiraling out of control extremely quickly on both sides of the Pacific (and because of the time zone gap between the US and Japan, the spiraling pretty much continued unabated 24/7). FSS acted rashly, we got concerned, erroneous news stories about Wii U releases and so on went up, the Japanese fanbase noticed and got upset, it escalated because of the initial lack of acknowledgement from FSS, we at MotK got upset because we were concerned for the image of the Western fandom as a whole, and so on. There was never any time to step back and moderate the dialogue.