I would say it is against the general principals of "open source" as you might find embodied in the modified BSD license (or simply in the notion of the public ___domain); but "free software" is more about the enforcement of a social contract, one where everyone has agreed that the "payment" we receive by providing software to the community as open source is that others will also contribute to the shared pot (as opposed to "freeloading"). In a perfect world, it wouldn't be needed, but we don't live in a perfect world.

That said, I agree that this example sucked: the argument wasn't even that strong, party because I get the impression that Stallman doesn't really "get" Java (based not just on this example, but from other situations where Java comes up; it just seems like he never looked at it very closely to see what it really wasn't actually capable of: he seems to give it much more credit than it is due). The comments on the mailing list seemed to defeat his argument, which is why I continue to be confused that the discussion didn't continue.

As for why more people don't know about it, I don't know: it was a somewhat big deal on a bunch of mailing lists (again: it hit freebsd-advocacy and turned into a major event, somewhat bolstered by the GCC Introspector guy I mentioned elsewhere in this thread getting involved an sharing his stories as well). I can only imagine that not enough people care about mailing list history. :(