Making GIFs from Book Covers

Dear Rich: I am taking covers from books I have purchased (first use), scanning them into Photoshop, then creating animated GIFs to show how they may be portrayed in the future. The animation will alter considerably the original cover by this new technology but will use the entire title and name of author as displayed in the original. I will only be using the front cover of the book for this purpose. My work is for use in museum shows and the animated gifs would NOT be for sale, but for purposes of helping substantiate the theme of the exhibition which has as its purpose to make the public think about the future of libraries and the transformation of books as utilitarian objects into obsolete artifacts. Even though the animation may make some of the covers funny, “parody” would not essentially be the purpose. I have studied rules under “Transformative use” statutes. I think I would fall under “fair use” under these rules. For one, I would only be taking the front of the cover and title for use. Second, I would be transforming it with “new technologies” for a purpose of making people think about the future of books as utilitarian objects in themselves instead of “virtual objects”. Which would fall under “commentary.” You're correct that transformative uses are more likely to qualify as fair use. However, using new technologies to alter or convert the book covers probably doesn't qualify as transformative, anymore than converting a vinyl recording into a MP3 makes the result transformative. In other words, don't confuse transformations of works (creating derivatives, for example) with "transformative uses" of those works. We find the use of the term "transformative" to be fairly slippery, but it generally applies to the purpose and character of the use -- for example, are you using the work to make a statement that conflicts with the original intention of the artist? (Here's an article we wrote summarizing some transformative/fair use cases.)
Fair use. Also the fact that the work is not for sale probably won't make much difference in a fair use analysis -- it is still an unauthorized display and you are benefiting from the exhibit as an artist, either financially or professionally. Don't get us wrong; we're on your side and would like to encourage your creative uses. But we haven't seen your work and know that in the end -- even if you have a reasonable fair use claim, it won't make much difference if the copyright owners want to prevent your use.
Who's on the hook? Chances are fair to good that the copyright owners -- probably the publishers --  won't know about or care about your use. Unless the use is considered offensive or of depriving them of income, they probably won't be motivated to speed dial general counsel. But if they do care, your fair use arguments will be buried under the costs of making your arguments in a court room. Alas, it is in front of a judge that fair use arguments are decided. In addition, check your agreement with the museum. Finally, you may have second thoughts about the project if you are required to indemnify the exhibitor for any third party claims of infringement.
BTW -  first use/ first sale -- You refer to "first use" when describing the books that you purchased. We assume you mean "first sale," a copyright doctrine that lets you sell or dispose of authorized copies that you purchased. The first sale doctrine does not permit copying, however, of the cover or contents of the books.