I recently mentioned Tanya Grotter, Dmitri Yemets' Russian "cultural reply" to Harry Potter. I've been reading Wikipedia on the subject, and was interested to find behind this a long-running story of Russian adaptations of classic Western literature - not mere translations but Russification to adapt to local cultural flavour. We have Tolstoy's Buratino (based on Pinocchio); The Wizard of Emerald City, Alexander Volkov's adaptation of L. Frank Baum's Oz mythos; Nabokov's Anya in Wonderland (see Nabokov as Translator for background); and Boriz Zahoder's adaptation of Winnie the Pooh (see the Zahoder page at the Russian State Children's Library). These works have acquired classic status within their genre: the Volkov adaptations have even come back into English and inspired the works of March Laumer (brother of SF author Keith Laumer - more about him soon). I find it hard to conclude JK Rowling's successful litigation to prevent Western publication of Tanya Grotter to be of long-term benefit to literature; Tanya Grotter and the Magical Double Bass looks an interesting book that could enlighten Western readers about Russian mythology and life in modern Russia.
You can, incidentally, with a little Google-Fu, find a detailed English-language analysis of the the first three Grotter books in Tanya Grotter: a Russian Harry Potter Knock-Off or Parody?, Mark Hooker's conference address reprinted in Selected Papers from Nimbus-2003 Compendium. If you go to the link above and search the book internally for "Tanya Grotter" (use the Google Books "search in this book", in the right-hand sidebar) you can track through the article page by page (ie pp75-104).
Hooker ultimately concludes that the relationship between Harry Potter and Tanya Grotter is akin to that of Gone with the Wind and Alice Randall's The Wind Done Gone, a retelling from a slave perspective (marketed and legally defended as a parody, though it obviously isn't one in the usual comic sense of the word). A legal dispute on very similar grounds to that of Emets vs Rowling concluded as an out-of-court settlement - Settlement reached over 'Wind Done Gone' - enabling the book to be published. The US climate and scenario is, however, rather different, in that The Wind Done Gone was "home-grown" and had strong expert support for its cultural perspective; also, a block on publication raised First Amendment issues of "unlawful prior restraint".
Addendum, 12 Oct 2008: I just ran into another example of a retelling of a novel still in copyright, Pia Pera's Lo's Diary 2001 , Vladimir Nabokov's Lolita retold from the point of Lolita herself, portraying her as a sadistic monster: see Salon Books' The Nymphet Strikes Back and Nerve.com's On a Book Entitled Lo's Diary (Dmitri Nabokov's commentary). Despite considerable legal wrangling, a settlement was reached between Pera and Nabokov's estate - Pact Reached on U.S. Edition of 'Lolita' Retelling (Peter Applebone, New York Times, June 17, 1999). It shows that such accommodations are perfectly feasible.