TL;DR I'm arguing that fan interpretations of "canon" characters and derivative fan characters shouldn't be punished because they are such a core part of being in a fandom in the first place.
There isn't anything wrong with somebody's character resembling or referencing a canon character. It's just a person making their own character that happens to connect with a canon character in the same way that people in real life connect with characters (at least in the terms of cosplay - characters tend to have a "default outfit", and if it's a canon character's, that's pretty much the same thing).
I especially don't see an issue with kids making a character that's a canon character in a different form. Recolors exist, fan interpretations of canon characters exist. There may be discomfort with knowing that others would display those kinds of works publicly, but it really doesn't harm anyone to have things like that. This is just what people in a fandom do; creating fan characters, fan fiction, and any other kind of fan creation involves the creator's own personal idea of how canon characters and their fan characters would act.
Take the MLP fandom on deviantart; creators like Earthsong9405 and Loppodity have next-gen fan characters and interpretations of canon characters. People probably bash them all the time for "not being original", but there's far more people who just enjoy the "original" and "canon" characters in their stories and art. They wouldn't be such popular artists if fan interpretations were a real issue in a fandom. That's not even talking about how popular fan fictions are with canon characters.
Personally, I think the real problem has to be that Toyhouse's population is really particular. People store their original characters here on a site that values the copyrights that the user has over their own characters. There's, inherently, a large value on having a character that is completely original. But not everybody has fully original OCs. Barely anybody does; we have tropes, color schemes, and even outfits that tend to be inspired by something else we saw.
I guess what I'm trying to say is that there's unnecessary bashing on people who are just figuring out this OC stuff, and it's just because it's got to do with a fandom. Where else is a kid going to start? They found something they liked and wanted to build on it. What's wrong with that?