I've not heard of that, but I've not been very active in the iPhone scene over the last few months. I implemented something similar, which is to encrypt all files (lua scripts, images, data files, etc) using a symmetrical algorithm with a fixed key. That does not protect the PNGs that are the application icon or the default splash screen, but I don't know that those could be protected as they are loaded by the OS itself.
My hunch is these people doing the rebranding are looking for the low-hanging fruit - apps that can be quickly and easily modified. There really isn't much money to be made like this. Anything making decent money would have to be popular, and popular apps are seen by so many eyes that it would be recognized as a knock off. In that case Apple would pull the app and the fraudsters would not receive payment. There is a long delay between listing an app and actually receiving payment from Apple, so that hurts the chances of the app making any actual money before it can be recognized as a rebrand.
In our case we really wanted to protect the data files in some way because all the game-specific behavior is coded in Lua, so we would literally be distributing a lot of source code plaintext if I didn't have some sort of encryption.
Dan