had it been me i'd have asked the artist if i could use the image with their name in the credits. that way i would not 'lose' the image and in theory nobody would get hurt. but it happens that something gets copied, or near copied by accident (look at the music industry) and the person has no clue it even happened.
it is good to see that this type of thing can be handled civilly on a public forum.
otoh, i wish we could have seen the image in question to get some idea of what happened and how. also, i'm always sorry when i hear anybody deleted their art. not sure why, but i had the same reaction in school if a classmate crumpled up a drawing... i'm just that way...
actually i came trying to find the contests because i think they will let me vote by now and i got distracted by the thread.
good luck, you two.