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So if I am understanding this correctly then say JT Fox makes an original model and offers it up for free. It is immediately copyrighted upon being created.
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Correct.
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He offers it up as a freebie on a website but does not include a EULA with the model.
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Can be done.
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John Smith dowloads the model, prints it out on his printing press quality printer and offers it up for sale on ebay. Lets pretend Joe uses top notch paper of the proper weights for the model, his is printing on a printer that most people do not have access too. The model could be printed to the same quality as major kits from halinksi etc. he chooses to sell this on Ebay for 9.99 to cover the cost of his labor, the paper and the use of the printer. Please keep in mind you may not know the quality on the ebay sale. Acceptable or no?
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Yes.
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Another guy BillyBob Jones also doenloads it and prints it out. However he uses plain old paper with a really old inkjet printer that doesnt do a very good job. Seeing John has one for sale at 9.99 he undercuts him and goes with 6.99. Also keep in mind you have no idea what the print quality is acceptable or no?
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Yes. You pay less, you have to expect less.
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Yet another guy - we will call him JimmyJohn Also downloads it along with all of JT's other excellent freebies. Makes a cd out of them and throws them on ebay for a buck to cover the cost of the cd and his ebay fees, if it sells for more then so be it... Acceptable or no?
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Yes.
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Now this fourth guy, we will call him Mike Angelo Wink he downloads this model, prints it on his good laser printer. Builds it up spending about 50 hours of his time (hey it was a really nice model!) building it. he then takes the time to give it a nice coating, mounts it up really well so it would make an excellent display piece. He puts it on ebay for $50 bucks to cover the time and effort he put into the model acceptable or no?
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Yes.
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Now lets take all the same examples but full credit was given to the design directly on the ebay sales page - same answers even without explicit permission from the designer?
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Yes. The seller is even more polite giving credits to the author.
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Now lets say that JT included a EULA that stated something of the sort - This model may not be sold in any form without the express permission of the designer (I know thats not enough but you get the idea....)
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In this case "Yes" becomes "No", but only a Judge can stop him to sell the free item. To do so, the Author should register the copyright on that item (paying to the U.S.Gov. a fee of several $100 and it is not so easy to perform it after publishing the item itself), and report an infringement of copyright. In these days Ebay try to prevent it "listening" the claims coming from users. Indeed a Judge could make Ebay guilty if they didn't take any actions on the case.