Can someone translate this into English for us non-Physics geeks? What exactly does this mean? Will it lead to new applications of magnets (the closest analogy I can come up with from this brief description)?

Personally, I'd start by looking at similar names. Or different extensions. By making an offer, you may drive them to buy other, similar domain names in order to force you to pay a higher price.

While I agree that evilviper has a very pragmatic solution to the dilemma, there are certain questions that only you can answer.

How would you feel about being an outcast to that community?
How much do you believe in open source?
Do you really want to work for a Microsoft wannabe?
Which do you value more at this point: freedom or a paycheck.
Do you really need this paycheck?
What would your family say?

Jobs come and go. A good programmer is never out of work for long. If you truly wish to keep working on this open source project, then pass on the offer. If you need a paycheck to support your family, then go with the job. Family first.