So... what is a student (or teacher) to do?! 

Go to the experts - experts who have given us permission to link to their sites, of course.

Brad Templeton has put together two very readable sites on copyright:
A Brief Intro to Copyright
10 Big Myths About Copyright Explained

The University of Texas has an excellent site that includes the Four- Factor Test and a list of linked sources for requesting permission to use someone else's materials.

Another excellent source of copyright information is the Resources page at the Illinois School Library Media Association (ISLMA).  Scroll to Copyright.