Re: Hypothetical Business Plan

   So far, so good, but the question is how to discourage other people from
   doing the same, and reducing the potential profitability of my hosting
   business?

The only way to do it as 100% free software would be to provide the
best service.  This could keep you pretty busy :).

   I could put a proprietary version of the software on my server that
   added the security features. 

Um, or you could do that.

   I'm not sure that's allowed under a lot of open source licenses,
   but it is for my "personal" use, even if it's hosted on a web
   server that everyone can access.

Yes, it is allowed.  

But...

"Freedom" as applies to web services is sort of a grey area, i.e.,
I think I have more liberal views on this topic than RMS. ;)  My
feeling is that the free software movement should include FAIF
web services as one of its desiderata.  But for some reason this
idea meets with serious resistance.

   Is this viable? In keeping with the spirit of open source? 

It depends on how spirited you feel.

Joe