IAABP (I am a biology professor).
For basic maths or physics, I agree with you that open source textbooks would be a great idea. The problem is when you talk about textbooks for more rapidly evolving fields, such as the life sciences. I can see how open source textbooks would be a very difficult proposition for biology texts. If the government wanted to fund such an endeavor it would not be "write once then forget about it", you would have to constantly update and revise it every few years. This means that there would need to be a permanent editorial board with support staff. The editorial board would have to have sufficient expertise in the field(s) to recognize what constitutes a significant advance in biology, as well as be able to decide what is an appropriate level of knowledge to present in textbook format. What with my teaching schedule and research demands, I just don't see me or anyone else in my field doing this, because it would be a full time endeavor that would take me out of the loop of my other professional duties. Unless there is a permanent position created for this (e.g., an NSF directorate with program officers and associated staff), I just don't see anyone risking their career for this.
A completely open and crowd-sourced book in the vein of Wikibooks is also doomed from the get-go, because any dolt can come along and edit things that have been carefully considered and written by an expert in the field (this is why I no longer contribute to Wikipedia). I suppose a hybrid model is possible, wherein edits may be submitted to a transparent editorial board for consideration, but again there is the issue of who would be willing to act as editor?
I suppose a third possibility to hold down costs is the formation of a non-profit publishing corporation that would publish works just as traditional publishing houses would, except that with a non-profit charter it would be able to keep prices low.