Denny has always been very supportive of users adapting his models for their own needs - both physical cut-and-paste and through graphical editing programs. If you browse around the kitbash forum, you'll see evidence of that all over the place.

Yes, I know there's that bit of seemingly contradictory language in the official about "You may not modify any of the materials". This has been pointed out before, and IIRC Denny clarified that that referred to distributing changed versions, not changes made purely for personal use. Can't find the thread where he mentioned that, though.

If you need more assurance than that, I'm afraid you may have to wait for Denny to give you an answer in person. You can also try emailing him, or sending him a PM.

For the record: In the course of my own kitbashing endeavours, I personally have "reverse engineered", "disassembled" and otherwise "modified the materials" in a number of various ways. Even going so far as to try recreate a layered representation from the flattened pdf files (e.g. to move doors and windows on a wall, etc. Heck, I've even "reduced the software to a human-readable form" on occasion (looking for legible tags using the "strings" command in unix). I bet most of the people working on kitbashes have done the same.

It may not be a bad idea to change the Conditions of Use language to reflect this sort of behavior...