Quote: "...you can do anything you want with it, as long as you don't make a profit. Even if you do make a small profit off of ads, chances are no one is going to care, let alone notice.
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Basically he is wrong. You are not the interlectual creator/ owner nor the legal owner of mario or anything related to it.
People get away with it simply because it costs too much to sue everyone, which is why they write request letters. On the other hand, if you receive one of these and you fail to comply, then they may, or may not make an example of you. It really depends on what they want too do. Your level of risk goes hand in hand with the level of exposier and interest that is generated.
I would ask you one question though. Why use Mario at all? That style of platform/ 3D game is hardly unknown. You can easily produce a mario "style" game without infringing upon someone elses copywrite. Change the characters, and use your own media instead of ripping it from one of theres, and you will have a perfectly acceptable mario clone without resorting to theif of anothers idea's.
In reguards to pacman the same thing applies, produce a clone, call it something else, use your own media, and you will have no problems at all.
I lay upon my bed one bright clear night, and gazed upon the distant stars far above, then I thought... where the hell is my roof?