Is it ethical and right to include template-based works (i.e. sites built from a WordPress theme) in your portfolio, or is it considered the property of the original author?
Disregarding the implications of derivative work, that’s a legal matter and different. Template systems are meant to be altered in many instances.
There are a ton of positions out there which are looking specifically for those who can alter template systems to client demands.
Bootstrap is a template system. WordPress is a template system. And there are dozens more. Many employment positions, or client requests are specifically looking to adapt an existing system to meet demands.
If it is this type of position you are seeking, then showing off your ability to adapt a template system to meet various demands would be beneficial.
Conversely though, if you are seeking positions or clients interested in actual design and creativity, showing template alterations in a portfolio will do nothing more than devalue your portfolio.
Ethically . . . If you fully disclose that you’ve edited templates, I think it’s fine. If you do not disclose that you’ve merely edited templates and are hired based upon those templates, you would be committing fraud to some degree which could be grounds for dismissal. It certainly would never reflect well on you if this was discovered after the fact.
To look at it differently…..
Imagine you’re a chef.. applying for a position as a chef. You are asked to make a pasta dish to show off your culinary skills. You can either create marinara sauce from scratch or open a jar of Ragu marinara sauce. Which do you think would offer a better impression? While using a jar of Ragu may be absolutely fine in day-to-day operations, if the goal is to show off how great you can cook, building from scratch certainly does a better job at that.