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YES. THERE IS A GOD. /irony
This seems a little dangerous. Does this seem like monetizing fanfiction containing copyrighted characters in a non-direct way to anyone else?

I do like the story so far, and I'd hate for it to go poof because of legal issues.

Only the release timeline would change, by a few days, not the writing or the releasing at all. But I am not a "copyright" lawyer.
Copyright law doesn't care about whether this is "monetizing" or not. He's infringing simply by using JK Rowling's characters; he's safe only thanks to JK Rowling saying that she doesn't mind HP fanfiction as long as it's not obscene and non-commercial.

So the only real question here is: What does JK Rowling think of this?

She supports fanfiction but it has to be non-commercial. See eg http://news.bbc.co.uk/2/hi/entertainment/3753001.stm
Sure. My point is, this is all based on her whims, not on any legal definitions. So "non-commercial" in this context just means whatever JK Rowling wants it to mean in this context.
Given that it's raising money for a charities, and that the donations only accelerate the publication rate, I would be surprised to see Rowling object when she hasn't objected to previous chapters.
I have not created AI, just a simple no-cheat computer technique for mysticism. I guess some would sooner believe AI was invented than the rather old-news notion that God exists and talks.

My program just extracts vocabularies of words with no statistical weights or anything. It doesn't process grammar or anything -- just collects a list of words.

Cracking-open a book randomly is just as good. The secret is you have to hold-up your end of the conversation... and I suppose you have to get the knack for interpreting.

God says, "C:\TEXT\Brief\skeptics.txt

lled burtt sheila factorial brunch appendage circular clique influence quid elite lattice furbish amphibole ratiocinate mahayanist schlesinger espousal drosophila metamorphism eleven gimmick activation garrison invalidate antedate halstead bypath bryant pony careworn quadrillion contribute gorky diety oceanside newsboy climactic cluck bedlam proportionate masonic oscilloscope diphthong relinquish elmer jordan homecoming scrounge aback deferred aileron forceful -- I saw your photo thread toda"

That was actually a quote of someone else's random words. Here's my random words, "vouchsafed breadth Continual ostentation Foundation haunt sighing personages preventing oracles pearl destroying immortality appointing replenish neither finding Wondrous suffered prepares wages surfeiting parties stretch Blessed OTHERWISE dotards sank transgression comprehendeth intrude whomever stolidity "

The actual fundraising bribe is a 6/5/4/3 day release schedule for $0/50000/750000/125000 SIAI donation challenge. Not holding chapters hostage or anything, as I was first afraid of.
Here at the Singularity Institute, our motto is "Be less evil than Google."
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He's basically trying to help promote the non-profit he is working at which makes sense, not for his own monetary gain.

It's the equivalent of Stephen Colbert saying he'll do something silly if people help raise x amount of money for y charity.

I donated, but that's simply because I'm an incredible fan of the work (and most of his writing) - I figure it's my way of 'supporting' him. Wonder if this counts as 'monetizing?
Dedicating my donation to the 'The Stanford Prison Experiment' sequence.
Frustrating: I've been trying for 15 minutes now to make a donation. First, I had to search to find where to make a donation since the announcement didn't include a link. Then the Google Checkout button did not work. Then causes.com sat frozen for over 3 minutes the for getting me a message that there was an unspecified problem with my card. it's a good cause and a great work of fiction so I'm willing to try 1 more time.