it was my understanding that even a dynamically linked C program needed to be GPL compatible to use it (thus the reason for the LGPL). Am I wrong in your opinion?IMO, yes. If you compile a C program which dynamically links to Readline, and then distribute it, you're not distributing any part of Readline itself. The GPL does not apply because you do not need permission from anybody to distribute your own code.
In theory, GPL'd libraries are fine for proprietary applications to depend on (via dynamic linking). However, many vendors like to statically link their binaries so they don't have to worry about shared library incompatibility. This is where the LGPL comes in. A vendor could (for example) statically link GTK+ into their application, so they don't get complaints about somebody who tries to run it from a system without GTK+ installed. If they linked against Readline, they'd have to rely on the local system libraries.
Of course, it's possible to dynamically link a proprietary application against a GPL'd shared library, and then distribute them both. But now the GPL does apply, because GPL'd code is being distributed, and it's quite possible a judge could decide you're trying to play games to avoid the license.
Also, the recent WordPress theme issue probably mucks this up even more from an understanding point of view.
WordPress is a source of misinformation regarding the GPL (see below)
Some said even if the themes hadn't used GPL code but simply called existing routines, they needed to be GPL. Where do come down on that?
IMO, this is incorrect. The argument is that the WordPress API can be copyrighted, which (in the US at least) not a position held by the courts. If it were, any project which imitated an existing API (Wine of Win32, GnuTLS of OpenSSL, editline of Readline) would be illegal.
GPL misinformation originates from two sources, broadly:
* Those that want to distort the GPL's purpose, to transform it from a shield into shackles -- WordPress and MySQL are two examples. They release GPL'd code in the hopes of creating a "community" to mine for cheap bug fixes, but intentionally spread GPL fear so paying customers are less likely to download the Free version.
* Those who are opposed to Free software in general, who do not like the idea of users having full control over their property. Usually large companies -- prime examples are Microsoft (especially a few years ago) and Apple today. A few individual trolls/cranks exist here also, but they're mercifully rare.