But I know who comes out of this story with their reputation looking better.
Well, if they didnt have a reputation for being idiots before, they deserve to have one now. There is nothing honorable about being a company stooge and streetlawyer knows this :-) 
They (Raymond, Malda, etc) believe so strongly in a company they work for, a company whose creation they did not share in, a company over which they have no executive input - they believe so strongly in that company that they are willing to lose (in the case of ESR) 35.5 million dollars!?
That's pathetic. VA Linux _is_ suits; it's a company, not a cause.
When someone gives you millions of dollars worth of inflated stock and you dont dump some of it then you may as well make a career of playing the lottery because there isnt a whole lot more you can do to demonstrate a belief that economic reality is based on the premise that, if you just wait long enough, the sky will open up and shower you with all manner of pretty trinkets.
If ESR sold just some of those shares when they were around the 20$ mark, he would have enough money to personally tide over some of VA's recently laid off staff, pay someone to work full time on the Linux scheduler, and still have enough money left over to play eccentric millionaire.
Money means something. Money is health, food, housing, blood. Money is life. VA is nothing but one of several companies, none of which will survive Linux, the OS, or Open Source, the idea. If Open Source is the ocean and VA the titanic, who or what is being served by electing to go down in the sinking ship?
I used Fetchmail and was amused by Slashdot long before anyone ever heard of VA. There's a little computer shop near my house which will match VA's ability to cobble together a machine, part by made-in-taiwan part. Give _me_ 30 million and I'll give you a banner-free openforge as a personal tax write-off.
If I was a financial advisor I'd advise ESR to cut his losses and use whatever is left to finance Open Source in some other way. Oops, too late; there isnt enough left. You know, we live in a capitalist society. With financial genius such as ESR and Malda for friends, Linux doesnt need any enemies.
"May I point out that this story goes in as is or not at all, for very good reasons," is just another way of saying "I gave you that last sentence, what more do you want?" IMO, of course.