Basically, if you touch this with a ten-foot-pole, the pole now belongs to Microsoft, along with your arm and anybody standing too close to you. You also lose the right to use your arm to sell things.
If you're in academia and getting a stipend and you look at it as part of your research, Microsoft could argue that that is a commercial gain to you. If FreeDOS has ever been used to make a commercial product (this is very different from the GPL which explicitly delineates derivative works from works produced by the software!), then its developers risk breaking the terms of the license agreement if they taint their thought processes with Microsoft's code. So yes, I'd probably say you're right.
This is a really serious issue, because we can be reasonably certain that Microsoft wants to release a new version of DOS in the reasonably near future and so this is a sinister plot to get a nonexclusive license to FreeDOS so they can charge licensing fees. Quite ingenious.....
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