That hasn't worked well for too many people. Most OS businesses that haven't failed tend to dual license, and cripple the installation/documentation(technical or product) in some way for the OS version.

Yesterday's VMware acquisition of SpringSource suggests there is a very lucrative market.

Case in point though: spring source had "community" builds + special builds for customers, and the community builds + documentation were crippled somewhat. I know a lot of commercial open source users (who weren't paying) were disappointed by some of their actions.

I wasn't disagreeing with you that that is what they are doing. My point is that it has been successful.

Yeah, it's one solution. Freemium or paid versions for business is another.