You can have commercial software with source or with reverse engineering rights. You can also just illegally reverse engineer it anyway - only matters if you get caught, and companies will only suffer civil penalties (fines).
FOSS is now mostly sponsored by commercial enterprises. The part that isn't sponsored is dying or has died. Linux was a silly project by one guy, where are projects like that now?
There are still a lot of smaller totally independent projects like this. I suspect that there are more—far more—just-for-fun projects today than in past decades in absolute terms.
I love Haskell, I've spent a lot of time in the general area around functional programming, types, proofs and PL, and there is still a vibrant community with lots of amazing non-commercial projects there. I'm sure the same is true in other areas of the programming world.
Ditto for the Emacs world. Emacs and its package ecosystem are amazing, better than they've ever been, and ≈entirely driven by non-commercial work.
Same for a big chunk of NixOS, although there's also been some real commercial investment there now.
I never really thought about it before writing this comment, but, except for games, most of the software I use and care about is primarily community-driven rather than commercial. And it's absolutely great.
Despite smaller communities and low monetary investment, a remarkable number of things about Haskell and Emacs and Nix are simply better than any commercial alternative, full stop.
The problem isn't that this kind of software has died—it's thriving more than ever—but just that the rest of the field has grown around it even faster. Programming is so commercially valuable that there has been a ton of investment in it and now we have millions of people for whom it's just a career, and trillions of dollars pouring into companies powered, primarily, by programming. It's a wild time. The overall feel of the field is definitely different now, but you can still find classic hacker enclaves. You just have to cut through the noise first.
There are a lot of FOSS projects that aren't sponsored in a major way by corporations: LibreOffice, SQLite, the Linux desktop interfaces, a number of languages... I won't claim that corporations don't support those and others at all. Yes, many are attached to foundations for solid governance reasons. But there are many popular projects that largely exist outside of major corporate backing--especially direct financial support (as opposed to letting some engineers be involved part-time.