> In an extreme case, would this mean that you could Photoshop a model's head onto a nude picture and publish the results without that model being able to sue? Kind of a disturbing thought...

If it was being done by the photographer or company that the model signed the contract with, yes.

However: models can certainly negotiate to add their own clauses into their release contracts, if they have certain boundaries they don't want to cross with how their image is used. This will be noted on any stock photography an editor buys.

I've seen one that said "Not to be used in any connection with the tobacco industry," for example. You often see "Not to be digitally manipulated except for ordinary colour adjustment and sharpening", too.