Scalzi's side, even though I do have some sympathy for the general sense that copyright terms are now too long and IP law in general is too cumbersome, too strong, and too all-encompassing.
The OTW's argument (especially once the fans start to come out in droves to comment) seems to boil down to saying that fanfiction is a special unique snowflake that must be protected and allowed to thrive because of its inherent snowflake-ness. Even if that were true -- and I don't agree with it --that's not a legal argument, and legal arguments are what's needed here.
Scalzi's proposal -- for a Creative Commons-style release on the part of the original creators -- is easy and legal and could be done immediately. However, I bet the fanfic community would hate that, since it would limit them to specific works, and special unique snowflakes have to be left to fly free and roam where they will. A special unique snowflake that can only flutter over a defined list of works is not so special or unique anymore.
Another option would be to advocate for a major change in copyright law, making non-commercial derivative works legitimate so long as they remained non-commercial. That would, I suspect, be much more difficult than I'm making it sound -- it would be hard to craft language that would define it precisely, and the idea would have hordes of deep-pocketed enemies fighting hard to shoot it down. Still, it's plausible, and that's where I'd suggest the OTW focus its effort, if it's serious about creating a protected space for fanfic.
For myself, I don't see a problem with the current situation. Fanfic is like jaywalking, sodomy (in some jurisdictions), and ripping CDs for one's own use -- technically illegal but generally not prosecuted unless something larger is going on. Fanficcers apparently don't like that, but, really, that's their problem -- they're the ones breaking laws in public. They may justify it with blather about female spaces and gift economies, but lots of people justify breaking laws they don't want to follow.
The main problem with the OTW, as I see it, is that it's set up to defend activities that are generally considered illegal. That's not unknown -- there are various organizations to advocate for sexworkers, for example -- but it may cause problems with the OTW attaining non-profit status.
(And the manifesto's language is the worst kind of self-congratulatory in-group hoo-hah, going on and on about how wonderful and nurturing and special they all are -- it makes we want to either vomit or reach for my revolver. Note specifically that they admire "real person fiction," the vile habit of telling
I'd prefer not to see non-commercial derivative works attacked by the various rights-holders, but I don't think the OTW is going about things in the right way. (They are certainly doing it the fannish way, though, which is what one would expect.)