We need to forget for a moment that artists today cannot match the old masters. But what they still have in common (with the artists of a few hundred years ago) is that when they make art, they are interpreting something in the world. This interpretation is personal, and it involves insight into the thing that's being represented. Painting from a photograph is, broadly speaking, imitation, not interpretation (although plenty of serious artists use photos as a tool for documenting a scene).
Michelangelo, as you probably know, had a lot of discretion in how he posed and represented the figures in his paintings. He wasn't just taking a predetermined image and rendering it in a personal style. Because of the extent to which he could use his own discernment in deciding how to represent the subjects of the painting, he could express his own attitude to the subject (which was universal, at least in terms of his world) in a meaningful way.
Basically, the idea of a mail-order JPG->painting scheme seems completely dumb to me, because there is nothing special about physical paintings per se. They're only special when an artist is given a chance to make them special by using their own creative judgment and knowledge of the subject they are depicting. If that's not an option, a photo is perfectly good.
Nobody seems to have bothered to write a critique of Instapainting, presumably because all this is common knowledge.
In the past, patrons were generally well-known or well-established in a way that would have made them meaningful to the artist before the work even began.
On the other hand, maybe "random overseas person" actually is meaningful as a category, if not as an individual.
It's hard to think about.
EDIT: It would be interesting to learn how the artists feel about this type of work after a few years of pursuing it.