I am not a lawyer, but I work in a field where copyright is *very* important, so I'm fairly familiar (again not as a lawyer) with some of this stuff. I'm in the US so my understanding is US based, other jurisdictions may differ.
All works are copyright unless that copyright is specifically disclaimed. This means that adding a picture to your story is a violation of copyright unless you either have specific permission (You want this in writing or at least in email, CHYOA would probably prefer that they were specifically mentioned), or the work is licensed such that you may reuse it. Giving credit is not enough unless the work is licensed such. Also be aware that copyright can claim both specific drawings and characters themselves. An original picture of Superman or a My Little Pony is a copyright violation of DC Comics and whoever owns My Little Pony, even though the work is original.
My advice is first, don't use any copyrighted characters at all, this is going to apply to most images you might want for a fanfic, unfortunately. Then look for works that have specifically had their copyright disclaimed (this is called placing a work in the public domain) or that are licensed such that they can be reused with easy to follow instructions. The most common licenses used for artwork that allow reuse are the Creative Commons family of licenses. These place requirements such as attribution (crediting the creator), and clearly describe what you can do with it: whether you are allowed to edit the work, whether you are allowed to make money from the work or a derivative, whether you have to make any changes you make available under the same terms, etc (there are several flavors of these licenses). Google images allows you to set usage rights on image searches if you add click the "tools" icon. Several other search engines have similar options.
While this makes sense from a "common sense" perspective, the US copyright system does not operate this way. Whether you make money from the infringement is not material to whether you are infringing. Making money off of the infringement opens you to criminal charges, but you can still end up in civil court for infringement even when you aren't profiting or preventing the creator from profiting (such as art posted on publically with no cost to view). I agree that it's unlikely that you're going to end up in court because you posted a picture in your story, but you could.
tl;dr: Don't use any pictures unless you know that you're allowed to under their licensing terms.
This is very informative and helpful, but some of the points you make, especially those regarding how to acquire copyright-free images I think are in most cases not exactly feasible.
I'm thinking to all those fanfiction stemming out of works of last decade for example.
Also, personally I find it very frustrating already to search for a fitting picture, even without having to reduce my resources to only copyright-free images.
I would probably just give up if that was my only option.
These are probably the steps that someone aiming to have a patreon or to go semi-professional should consider, not us dweebs
Another thing I would take into consideration, is that a great part of the pictures circulating on the site are themselves semi-amatorial works(not considering mr.hyde works) with all which that ensues.
In those cases, I higly doubt the author would want to retaliate for using, let's say a cartoon reproduction of a naked Captain Marvel, whe he/her in the first place made an inappropriate use of other's intellectual properties, Marvel's in this example, don't you think?
Marvel should take his stuff down in the first place, but that won't happen because nowdays they actually count on that kind of 'fallout'.
So I don't see Ganassa, which for all I know is rather established, sueing you Warden-Yarn15 for using his picture as cover. To draw his stuff, did he ask the rightful copyright owners first?
I honestly have no idea, but I'm inclined to belive he didn't.
