Amazon's concerns are purely monetary. That's to be expected; it's a business. Here's a quote from the L.A. Times article on the subject:
"We've been very pleased with the success of the Kurt Vonnegut backlist on Kindle," said Donald C. Farber, a trustee of the Kurt Vonnegut Trust, in a statement. "With Kindle Worlds we have an opportunity to further his reach with today's readers."
Referring to the protagonist of "Slaughterhouse-Five," Farber continued, "Billy Pilgrim, unstuck in time, is going to quickly become a Kindle Worlds favorite."
Slaughterhouse-Five is on Modern Library and Time Magazine's lists of the 100 best novels of the twentieth century. This may sound silly to the people at Amazon, but Vonnegut's works are, quite frankly, art. More than that, they have become a unique and important part of our literary heritage. I'm not saying that his ideas or even his characters should never be used, but there is a difference between considering the merit of a submitted work and actively soliciting fan fiction. Simply put, if it were good enough to find a publisher, it wouldn't be published through your fan fiction program. If you write a story about Tralfamadorians and, after changing the name of their species and physical description, you can't sell that story to as SF magazine, it's not good enough to be published.
In case you were wondering, here are the rules for the Vonnegut fan fiction project. Pretty much anything the man ever wrote would be prohibited under these rules.
One rule is: "We don’t accept offensive content, including but not limited to racial slurs, excessively graphic or violent material, or excessive use of foul language."
This is a man who has a story called "The Big Space Fuck." Breakfast of Champions has a drawing of an asshole on page five. From God Bless You, Mr. Rosewater: "Now Eliot came out of the lavatory, all naked and hairy, drying himself with a tea towel... Eliot now began to play unconsciously with his pubic hair. It was nothing extravagant. He would simply uncoil a tight spring of it, let it snap back into place."
Vonnegut's books have been burned because people have found the content offensive! His novels frequently end with the protagonist committing suicide! He routinely draws assholes in his books! And what counts as offensive content? He writes about World War 2. One of his novel's main characters is a Nazi propagandist. Try that without risking offending anybody. You've figured out how I feel about this, but maybe I should let Vonnegut speak for himself.
From Palm Sunday (page 221):
"I did want to make the Americans in my book talk as Americans really do talk. I wanted to make jokes about our bodies. Why not? Why not, I ask again, especially since Riah Fagan Cox [his ex-mother-in-law], God rest her soul, assured me that she herself was not wobbled by dirty words.
"If I had gone to Riah's friends...they would have insisted that the words should not be published anyway. It was bad manners to use such words. Bad manners should be punished.
"But even when I was in grammar school, I suspected that warnings about words that nice people never used were in fact lessons in how to keep our mouths shut not just about our bodies, but about many, many things -- perhaps too many things."