1) I said "educational non-profit" - do you think there's a reason I used these two words together?
Because you think that non-profit schools have some special rights when it comes to "fair use" that students at commercial schools do not? And you're repeating this because you missed the fact that I wasn't specifically referring to a for-profit college use, thus it applies to non-profit just as much as for-profit? The fact is, I cannot simply duplicate college (non-profit educational use) textbooks and hand them out to my students and claim "fair use".
2) I'm well aware that there are other considerations for fair use (which is why linked to the page), one of them being impact on the market value of a work.
Another being whether the work is being used in its entirety; and/or for review or criticism. Copying an image verbatim as an illustration for a school paper fails these "fair use" criteria.
You can't honestly claim that a kid taking an image from google in order to use in their class work violates this.
I can and I do, because it does. I've already said why. The link you provided says there are FOUR considerations, and all of them must be met. If you are copying someone else's work into your schoolwork 1) in its entirety and 2) without the purpose of review or criticism of that content, you are outside the scope of fair use. And if you did it in a paper I ever graded, you better provide a cite for the source or I'll see that as a claim that it is your work, just as copying text from Wikipedia into your paper needs a cite or it would be plagiarism.
That doesn't mean that I think there is any purpose to be gained from suing those students who do it. A use can violate "fair use" and not be worth legal action.
but are you seriously arguing for throwing the baby out with the bathwater?
I don't see where I've mentioned any "throwing" of anything, only that your "educational non-profit" criterion is insufficient to determine "fair use", and I provided a trivial example to that demonstrates that fact.
(i.e. for a few asshats we'll just destroy the value of the resource for everybody)
I'm sorry, but you've lost me here. Where did I say ANYTHING like that? Did I say we should shut down Google (or Wikipedia, or ...) because some people violate fair use with the material they find there? Can you provide even one glimmer of a quote from me that says this?