I however agree that's is not going to happen both because of the nightmare of relicensing 3rd party code, and because an OSS Win7 release with community updates and security patches (no telemetry) would probably displace a good number of Windows 10 installs in short time.
If closed source software that talks to the Internet is an inherent privacy risk, let's maybe start by focusing on Google Chrome and Android, which have access to much bigger pots of honey than Windows itself does these days.
In short, this seems to be one of those spots where all the FSF has is a hammer.
If Microsoft was as dedicated to open source as their recent PR pivot and thrust has lead us to think then they would have no problem taking on this monumental task.
this 'stupid' PR move from the FSF is only a response to a similiar PR move from MS.
This just looks silly.