Sure there's a huge problem with the quality and the reliability of appliances.Basically everything's shit, or there's are high end products which are a bad deal, economically.

But solving that is much, much bigger than just open-sourcing embedded code.

Also

>>Oh I'm well aware. Version control with something other than zip files isn't compatible with the mindset of embedded developers :P

That's one thing the mbed default IDE(web ide) does well - it gets people to use version control.