We've studied this conundrum in my Internet Law course, and I'm still slightly torn on which side to take in the spat.
Despite my growing wariness of Google's power, influence, and intrusiveness (I'm posting this from Gmail!), I think I'm leaning toward supporting Google's effort to bring out-of-print books to the web.
Letters in Bottles began in January 2005 as "Letters in Bottles: The Island Pundit" at the University of Wisconsin. Started by Steve S, the blog includes a number of regular contributors, all of whom met originally on the "island" of Madison. We are: A veteran of the Iraq War. A former Peace Corps volunteer in the Caucasus. A law student in New Orleans. An Engineering grad student. We comment regularly on politics, world affairs, culture, news, music, and much more.