Nice writeup. It's a tricky area, isn't it? Open source is great - I'd spend my days working with it exclusively if I could, but in the end, it's all about scarcity, and where it turns up when the central thing (the code) is by definition, not scarce:
It is tricky, but it's also satisfying. Customers of Open Source based businesses demand a lot more, too, which is both a blessing and curse.
On the one hand, they feel more entitled, but they're likewise more willing to be involved in solving the problem because they have some ownership by being part of the "community". So our customers file bugs or post to the forum, just like users of the Open Source product do, rather than call us on the phone...the culture allows us to support it in the most efficient way rather than the traditional but horribly time inefficient way (the first time you find yourself describing that "slash" and "backslash" are different characters, and that "slash" is the one they want for paths on UNIX and Linux systems is the beginning of wisdom on how inefficient telephone is for support on a system administration product).
We're in agreement on how scarcity fits into the equation--people simply pay more if they can't get it any other way. When asked to put a fair price on the new Virtualmin Professional in the early days, for example, some of our FOSS users suggested unsustainably low pricing, a quarter or less what competitors were charging for less functionality. We ignored those folks, and took the advice of the people who were wanting to escape from the existing products in the field, and were willing to pay similar prices--they just wanted a better product. These days, nobody complains about the price. They're accustomed to paying for Virtualmin Professional now, and have begun to think of it as a separate product in its own right. It has acquired scarcity that it didn't have in the beginning when it was only theoretical and the OSS version was what they knew. ;-)
http://news.ycombinator.com/item?id=62945