Kid Charlemagne said:
But no NEW stuff will be produced.
If enough people do as you propose, WoTC will have two choices:
Let D&D die as a business. Which means that eventually, D&D dies as a game, except for a few people running 20 year old free content off the web.
or create a DND 4.0 that is incompatible with 3.0/3.5 and revoke the OGL/d20 licenses.
EDIT: The third choice, as Philreed has pointed out, is for "crippled" OGC to become the industry standard, in order to make it as difficult as possible for people to strip out the content.
Which do you prefer?
I need to nip this in the bud.
WotC cannot "revoke" the OGL. That's the whole point of an open license- it's self-perpetuating. That's why when you use OGC, you have to make your derived content OGC as well.
As to whether WotC can "revoke" the d20 license, that is another story. They can do so on an individual basis if you do certain bad things, like violate "community standards of decency." I am not sure if they can revoke it for everyone, ie if they decide to make a D&D 4.0 that is not OGL compliant. Perhaps someone else can answer that question.
In any event, the 3.0 and 3.5 SRD would be OGC until the the cold death of the universe (or Armageddon, the big crunch, Ragnarok, whatever), or the collapse of copyright law- whichever comes first. (This assumes laws don't exist outside of human experience, which I think most of us here can agree on. Whether ethics/morality exists outside human experience is another story- but I should stop now before I get too close to the dreaded "religion/politics" line of discussion.)
To get to the meat of your post, I think that your assumption is flawed. As was pointed out elsewhere, the vast majority of WotC's content is closed, even the rules stuff.* For the most part, they are not hurt by people distributing 3rd party publishers OGC for free. You can make the argument that it helps them. If I get someone's cool OGC free and think "ohmygod, this d20 thing is great! I'm going to go buy a PHB," WotC benefits. Of course, like any other company, they are hurt by the copying of copyrighted works on file sharing services.
Just because lots of OGC is distributed for free does not necessarily mean Wizards is losing sales, which, as you point out, could lead them to make D&D 4E. (For the record, 4E would have to be pretty darn awesome to pull me away from my beloved 3.0).
WotC will not let D&D die as a business. That would be stupid. They would put out 4E before that happened.
As to the merits/flaws of "crippled" OGC, I haven't given it enough thought, and to be honest don't pay close attention to what is closed and not closed in the products I buy. I am not a publisher, so it does not affect me. My initial feeling, however, is that "crippled" OGC is not so bad as some people seem to think. However, I wish that spell names/descriptions, prestige class names/descriptions and the like were not closed. Seems silly to me.
*My understanding is that since they own the original game, they are allowed to do that. They don't distribute stuff under the d20 license- they get to use the trademark without the license because they own the trademark. Now, if they make content derived from OGC (someone else mentioned they did this in Unearthed Arcana- I don't own the book so don't hold me to it), they are legally required to distribute it under the OGL. Again, if I am wrong, someone stop me before it's too late!
Disclaimer: IANAL.