I was thinking about developing a sidescrolling platformer very similar to an old Mario and Luigi game for NES. To start out I was thinking about taking the images from a site like this:

http://www.mariouniverse.com/sprites/nes/smb3

Which clearly states a copyright. I was wondering how far I am allowed to take these images. I figure I'm probably allowed to use it for personal development, but what if I publish the game as an exe file and send it to some friends? I figured a definite no-no would be selling the game with the copyrighted images included.

A secondary question would be whether or not I would be allowed to modify them slightly and then call them my own.