Great question! Yes, for sure: I intended that as part of the "scaled, rotated, etc." in the rules. You could also potentially skew, mirror, and even colourize...
I was a bit ambiguous with the description on purpose. I want to allow lots of creative freedom, but I also want to avoid someone skirting the limits entirely, e.g. by chopping the image up into individual pixels and rearranging them. That's why I included a subjective part right after: "recognizably." Mere mortals (or at least I myself, I guess) should be able to tell that the original image is the basis for what you're seeing. It's a little bit the opposite of the Derivative Works Explained in the Ludum Dare rules -- I expect only "bad derivatives" (if any) by their definition. "Good derivatives" are not wanted here because they're not recognizable enough.
