So, NO altering of quotes, even if just for purely humorous effect, is allowed either?

You’ve only taken a portion of the rule:

"modifying another’s post in order to cast him/her in a bad light is a sufficient, but not necessary condition to trigger a violation of this rule. Parsed accurately, the rule states that:
Falsely attributing a quote to another user; or
Modifying another’s post in order to cast him/her in a bad light

Are grounds for sanction.

There is also a prohibition on adding editorial comments to quote boxes or editing it to change the meaning.