"Extortion" was too strong a word. I meant it in the sense of "aggressive negotiation". Demanding a positive reference not to blow something humiliating is not extortion. If you demand money not to blow something, you're breaking the law, because there's no connection between the payoff and the threat (exposure). However, with a reference, it's "we're going to part ways, but it's best for both of us that we tell the same story, so let's get straight about what just happened". That's how you present it. Not really extortion.
Your advice to OP has a lot of value and on the whole I agree with what you are telling him to do. OSS contributions are a really good idea for him.
However, I still contend that an "odds and evens" mixed strategy will perform better than full disclosure.