I think they're probably in breach. But no one appears to have attempted to enforce their contractual rights by way of litigation.I feel the same, but people do it anyway.
I recently re-read the OGC declaration in Monte Cooke's Arcana Unearthed. I think it is very interesting to see where Monte (and/or Monte's lawyer) saw the mechanics(OGC)/product identity line to fall, and also some of the defensive wording used.
Well it would be different from the OGL in that one of the terms would have to be a promise to publish a work consisting solely of the OGC, and to license that in the same terms to any one else who wants to take it up.That ends up sounding a lot like the OGL except probably custom and possibly MacGyvered out of other licenses.
I think the greater onerousness of the two-documents approach might be a barrier to uptake - there is both the need to create the second PDF, and the need to host it somewhere so its accessible. And of course if the work ceased to be published (eg the host fails for whatever reason) then the licensee would be in breach.