That seems to be a major issue, while I know Torque and TSE, i have been working with RE for nearly a year.
I have been warned heavily about getting in with artists :P … Apparently by the time they get the programmers in the entire concept is fleshed out and all that is left is for the programmer to slave over it. Personally I dont see that as a team effort, and is certainly something I always hated about mods.
Im talking with two people right now about joining teams, both of whom have their concepts set in stone, and they may even have the technical details nailed down without a programmer which means it could well be an upward struggle from the start.
With regards to Royalty free content, I highly doubt that every team created their own textures from scratch? But rather used ones which were freely available. Obviously key characters, levels etc will need to be done. But logically a team could spend $50 on a DVD and get about 10,000 high quality textures. It wouldnt make sense to focus your efforts on environment textures or props/prop textures when for such a little price they can be purchased.
If there is nothing against using licenced engines, then why against royalty free content? The Games market is shifting towards nearly 80% outsource of artistic content. With companies like Liquid simply cleaning up. But thats my view, and until told otherwise I will assume that they are not allowed.