I agree with you that it's not a settled area of law, but that's not really what matters. The biggest lesson I've learned with my own infringement suits is that we have a difference between what's written and what happens.
Only a rare few cases actually go to trial. Most cases are settled and that's generally good. The law favors a settlement. The courts could not actually try all of the cases that get filed.
Here's the key point between parties, though. Although you can file suit on a contingency basis, there is no such thing as a contingency defense. That means the defendant will spend an awful lot of money just to get to trial to see if the court will reject the hyperlink as an infringement or not. Most people and most businesses don't see that as a valid expense. It's less costly for them to settle and agree not to use a photo that isn't theirs - even if it was hyperlinked from another site.
We can debate all we want on this board, but it's irrelevant. I know IP attorney's who file suit against hyperlink infringers and come out with a favorable settlement.
Most big Internet copyright suits don't involve contingency. But they do involve top tier, very expensive lawyers. There are some freedom of speech advocates who will occassionally provide a pro bono defense to a defendant, but in most cases, it comes down to the might of the parties. Thus, you are ultimately correct about actual practice. If a small time blogger, for example, suddenly starts receiving threatening letters from Time Warner, or Walt Disney attorneys, the small time blogger will usually give in to the demands.
And if google wants to hyperlink to your images and pages, no small time blogger will be able to take them on.
So typically, these things settle for the sake of financial certainty, as opposed to legal merit.