The worst that can happen to GPLed code

[Chris Jefferson]

First of all, let me say Hello!

Also, let me point out that (I hope) I'm not a troll. I've just been 
working on a project with some friends and we are now considering what 
licence to release it under. I'd quite like the GPL, but a number of my 
friends would perfer a "you can read the code, but you can't distribute 
altered versions" style licence.

The reason for this is that they believe that really bad things can 
happen to GPLed code. Therefore I was hoping someone could tell me, what 
is the worst someone can do?

Some example thoughts we had..

1) Someone could just take our source, remove all copyright notices from 
both the source and displayed when the app is run and put their own on

2) Someone could take our source, make minor alterations to it, and then 
redistribute it without admiting they'd changed it and leaving our 
copyright notices intact (both in source and in the help/about box), 
making it look like we wrote the evil version.

Now, we realise that evil people could always just ignore the GPL, that 
isn't a fault of the GPL. But are these two things possible?

Also, I notice that we must distribute the source in a version such that 
it can be compiled by the user. Does this mean:

1) We have to distribute (if asked of course) a copy of the source of 
all libraries, even if they are publicly available (but not installed by 
default)

2) We can't write code that depends on VC.net as it's compiler (say, not 
that we have any yet), as people wouldn't then be able to compile it 
themselves without buying VC.net.

Thank you for your help, sorry if I'm asking FAQs, and please try not to 
start a flame war ;)

Chris