i want to put up a couple of sites promoting particular authors, and
using the authors names in the url:s.
Like (non-regged examples)

http://stephenkingbooks.com
http://deankoontzbooks.com

This site would contain public avail information on stephen king, and
a complete list of his books (with separate pages for each book).
The site will contain for-profit commissioned deeplinks to various
book-selling sites.

Is this illegal, in the grayzone (and if so, where in the grayzone?), or all legal?

I have no wish to try and steal traffic from stephen kings offical
site, only to rank high on search engines for phrases like 'stephen
king books' or 'buy stephen king books'.

Quite a nice idea, but a bit risky.

If someone spots what you are up to then they will register the names
of other authors and cyber squat on them - so you'll get stuffed.

Blatantly using the author's name in the site name is rather asking
for trouble, it could be construed as 'passing off'.

You would be much safer going for something like :

    www.booksby.com/stevenking
or:
    stevenking.booksby.com

Incidentally www.booksby.com is already taken - I just checked

The Search Engines are not necessarily all that concerned about the
name of the URL, although some browsers try to find site names with a
rough match, which might be what you are targetting.

I've only looked deeply into one case of 'passing off', to me it was
quite clear that the holder of the address was a 'cyber squatter', but
incredibly assorted lawyers and adjudicators could not see the
obvious.

Perhaps someone else can see a 'safe' design pattern.