mrtd: "If they want to continue to sell licences to their commercial customers, they will need to retain some sort of "Copyright", although in the usual Open Souce models the term "Copyright" is meaningless."
Entirely untrue - all Open Source (and Free Software) licences, including the GPL, *depend* on enforceable copyright.
"For Castle to remain profitable requires them to remain in control of thier[sic] product and be able to sell it to their customers."
The benefits of open source to a company like Castle is that they can concentrate on adding value on top of the open source product, whether that's embeddable components; contract work; documentation; services or support.
Remember Peter Wild's original comments: some of Castle's prospects have been turned off by the fact RISC OS isn't open source. If they use the same definition as everyone else (i.e. more or less the OSD) then open sourcing RISC OS with a licence as described above won't gain Castle many new customers, and won't do anything for the long term future of RISC OS on the desktop.
At best, it'll allow a few of the remaining die-hards to tinker round the edges; but won't gain any traction with a larger OS (both "open source" and "operating system") community.