No, it's because open source competes with some of their upsell offerings and they want to preserve their auxiliary sales.

As for whether it meets your requirements, that's entirely dependent on context. In most cases it's a perfectly valid choice as long as you understand that you're taking on the associated maintenance and certification burden. In our case, it included stuff we had written and open sourced ourselves.

From what I remember, it does not. I think your legal counsel did a overly-broad reading of some clause or combination of clauses. Given that you keep bringing up open source and mentioned code that you yourselves open sourced, it was probably a copyleft linking clause and your lawyers erred on the side of caution (as lawyers do).

To the point, unless you avoided linking the default proprietary compiler libraries (such as the C lib) any work you open sourced under a copyleft license and distributed would be in violation of the copyleft license as you and your downstream would be unable to legally supply the source code to those libraries. You could avoid this by explicitly linking a copyleft compatible library like glibc instead of the default proprietary libraries, but I suspect your lawyers did not want to deal with the hassle of validating conformance. Much easier to just say you can not use it on open source products.

This is a general problem when dealing with proprietary software components/libraries, just most people have little familiarity with that since the proprietary library industry largely died since developers do not want to pay for their software dependencies.