Your trinity is entirely correct, so what is the business case for open source software? Clearly there is one: even Microsoft is getting in on the game.
Your examples of Linux software are a bit off base. In Debian's most popular packages, you have to go down to #259 to get to x11-common, and the first actual graphical program (iceweasel) comes in at #657. I understand that you're a desktop user and your business involves selling desktops, but I do wish that you would get past your myopic focus. Linux is a server OS, a development platform, an embedded and supercomputing platform, and while it can be used as a Desktop OS, there's really not much business interest in that.
I think you must be unaware that the majority of software is written to save money, not to make money. There's also a huge hidden cost to software: it doesn't exist in a vacuum. "Though a program be but three lines long, someday it will have to be maintained." The cost of maintaining software for which you don't have the source code tends to be "finitely large".
You're correct in what you say, up until you identify it as a flaw. Yes, it probably keeps Linux off the desktop. I'm sure that Mark Shuttleworth cries himself to sleep over that, but I'm sure Linus couldn't give a shit, and neither do the rest of the companies which have invested untold billions of dollars worth of developer time into the Linux ecosystem.