I noticed this last night and responded the way I respond to every 16-year-old who hasn't figured out that things on the Internet aren't free for the taking; I used mod_rewrite to replace the image with a picture of Hitler when the referer matched his pages. (I find Hitler sends a better "I better be careful" message than Goatse does because random people looking at the page won't automatically assume it was unintended.) He responded by getting a copy of the picture, hosting it on Blogger Photos, and continuing to use it.
What's particularly strange about this is that he's not some 16-year-old who hasn't figured out that things on the Internet aren't free for the taking; he's a 30-year-old psychologist at a Kansas City AIDS charity, married to a professional photographer, and he grabs pictures off of the Internet and pretends they're him.
I sent him mail noting that it was not only infringing but pretty creepy, and asked him to stop using it. We'll see what happens.
Edit: Ah, good, he took it down already. That was easy enough! Thanks, Doug. (Boy, it's hard to find DMCA information at Blogger. You have to go to Google's help pages to get the details. Not that I needed it this time.) Still weirded out though.