You insist on viewing the issue through the lens of a software maker. You're absolutely right: spending even one dollar to create something that is to be given away makes no sense as a business model.
But that is not what the problem looks like to a hardware vendor. Having an OS is a prerequisite to selling hardware. I gotta have one, or I don't get to sell any boxes. We already had the war about every hardware vendor having his own high-margin proprietary OS, and the IT managers won. UNIX it shall be. So here I am stuck with a huge expense maintaining my own flavor of UNIX, which I can't make any profit on because UNIX is UNIX (that's not what my brochures say, but the IT managers can only be fooled so much). UNIX-based OS's are a profitless commodity product, except for the services I can sell around them.
So here comes this linux thing, where I still get to sell my box and my services, but instead of footing the whole bill myself for my flavor of UNIX, I just chip into the pot, and we all use the same thing and compete on the basis of hardware features and services, which is in fact what we're doing now anyway.
The hardware vendors do not care whether the linux development effort makes money. They already have a UNIX development effort that doesn't. If they can shuck that, and replace it with something that costs less or ties up fewer assets, they're in.
So here's IBM Global Services "partnering" with Red Hat to handle all the sub-$250K linux consulting deals they find. IBM didn't want the damned things anyway. And for this they get an operating system that actually moves iron. Not that much yet, but this is a much better deal than funding AIX.
If you only look at the software economics, you can't see what's driving this.
Yes, I know, and I'm glad it's finally getting through to you. But the rest of your post drifts off into some sad form of an excuse for hardware companies just because time after time they have proven they can't write operating systems worth a flip on their own.
If they can't create good software on their own, that's their problem, and they will need to negotiate with other companies who can and get some software better than their competitor's loaded on those systems asap.
But breaking off business ventures with O/S companies, then stealing their technology from them to use for yourself without paying the original owners for it is simply not acceptable.
There are lots of examples in which business "giving" something for "free" is good business. Think of McDonald's and ketchup. You're not charged for how many packets you take. And a packet of ketchup cost infinetly more than the copy of Linux installed on a hard drive.