Quit looking at the Chapmans and look a the COLREGS.
Read Rule #3 again. By your interpretation he could go out there, throw one line in the water and run around for miles scouting his bottom machine for new places and having the 'right of way' simply becasue he is flying red over white even though he is not engaged in the act of fishing? I see shrimp boats flying the green over white as they idle down the home channel here. I see boats running 40 mph with the dive flag up. Should we give them the benefit of the doubt that they are trawling shrimp in the channel or snorkeling/diving at 40 mph.
You know the 2 above scenarios are against CG regs as much as not having lights on or flags up.
The key words are ENGAGED and RESTRICTS maneuverability... not lights on... not somewhere near the gear... not running to set up gear...
If they are actually engaged in the act of fishing be it setting up gear, retrieving gear, or actually engaged in retreiving a fish, THEN they are RESTRICTED IN MANEUVERABLILTY.
WE won't even get into day shapes. That would blow everyones mind because most have no clue where to look for them let alone what they are looking at or what they mean.
I do side work for Wolf Technical in Indiana as an expert witness in boating accident cases and trials. If you read enough depositions you would be shocked at what some peoples interpretations are. If you read the USCG Regs word for word, verbatim, you almost never go wrong.