Well as far as I'm concerned nothing has been done.
No matter how small or large, the head has been ripped from that from. Which is theft, not suspecting it just is.
It's not the fact that confusion may occur, it's that the game has the same name, same concept, and same stolen sprites as the rom hack. Also did I miss the meeting where if you send the original owner a email that suddenly makes this all better, with no notice of permission or not?