Did the US LoC make Fan Edits legal?

The key phrase is "short portions." I don't know how that will be defined, but I believe it won't be fanedit length.

Sadly, I don't think this changes anything.

It depends where you put the emphasis.

Motion pictures on DVDs that are lawfully made and acquired and that are protected by the Content Scrambling System when circumvention is accomplished solely in order to accomplish the incorporation of short portions of motion pictures into new works for the purpose of criticism or comment, and where the person engaging in circumvention believes and has reasonable grounds for believing that circumvention is necessary to fulfill the purpose of the use in the following instances:

OR

Motion pictures on DVDs that are lawfully made and acquired and that are protected by the Content Scrambling System when circumvention is accomplished solely in order to accomplish the incorporation of short portions of motion pictures into new works for the purpose of criticism or comment, and where the person engaging in circumvention believes and has reasonable grounds for believing that circumvention is necessary to fulfill the purpose of the use in the following instances:

This is where more clarification would be helpful because without it this may just allow Youtube documentaries off the hook (RedLetterMedia may be pleased to read this) or it may also allow for full length projects if the film maker has reasonable grounds (within the suggested guidelines) to justify the action.

In other words it may mean short clips are free use within the guidelines but longer reworkings would require justification within the guidelines.

Or it may just mean short clips require justification within the guidelines.

It's just a US legal statement (untested) there is nothing to stop a non US distributor (or possibly a non US subsidiary of a US parent company) from taking an action in another country using their legal system but it is an interesting statement.