wow, that was a long read! thanks to all contributors for sharing some very interesting thoughts, Jinx for your time, Ian for your concerns which I share, mixed for the insights, Amy.. you know ;) and anyone I forgot after post x.
Here's a few ideas: I've been using Mambo / Joomla! for a few years now, just as a hobby, for my own site and pleasure mostly. During those years, I have used many extensions, both free and pay-for. I bought many extensions I don't even use to support the dev(s). One I'm most happy with, in usage for a long time on my site, and not to nazme it is SEF Advance, which has been much discussed because of these same matters before.
I bought 2 copies of this component (it's not cheap) while it was encoded but not yet using ioncube, which I hate because it requieres an extra step on the server.. where's the easy of use? And even though there are decompiled or whatever that's called versions "out there". And they work.
And I bought many! other extensions. Used free ones. The main problem I see: if an extension I like and which is a main feature of my site needs fixes and updates because of J! evolution, will I get them from the dev? If the dev decides to discountinue the extension, is someone else able to provide updates / support? In case code is encoded, I don't think so.. In case it's a free extension, will another dev be willing to take up unknown code, work himself into it and dedicate his time to keep it alive (see OpenSEF / Simple~=>Fireboard for a nice "yes" example)?
My point here is: I don't mind paying for an extension if it works, gets fixed if it breaks, and gets updated (you know, those "free updates for lifetime" where you find out it's not your lifetime, but the extensions -which is ended whenever the dev says so

). I also don't mind "giving" money to a dev to help him continue work on an interesting project. I don't know much php, but sometimes I do want to look at the code, and maybe change / fix something (thanks to advice found around here for ex.). We've seen examples of extensions "calling home"/sending emails without telling the user before.. Bad, unacceptable imho.
I'd like the freedom of choice on the extensions site, but I'd like to know exactly what I'm getting, and would not buy an encoded extension again -except if I know (as much as is possible in the virtual online world) the dev (Adam, Vimes et all). I'd still feel annoyed.
What about: the hobbyist sites: if you don't make money from it, use for free, Commercial usage: please proceed to cash register?
[quote="GPL"]Templates are minor enough that it is not worth using copyleft to protect them.[/quote] Makes me wonder: why does everybody separate templates and extensions as if they were completely distinct add-ons -they used to be referred to as "CMTs" before: components, modules, templates?! Why is it ok for everyone people make $ from the main thing a visitor sees of your site: the template which presents and lays out all the data, but not from the logic that drives additional capacities of the system (com_, mod_, plug/bot)? Ok, they're not encrypted, still..
I hope this isn't going to remain just another discussion on such an important topic, and real solutions and resolutions will be made known after everything is thought through and clearer for all of us.