On the other hand, Tarn has said that he now no longer understands this part of the code. If he ever needs to modify it he'll either have to learn how it works from scratch, or farm the work out to the community again. Since he has no desire to become a project manager, he's unlikely to do the latter.
Also, the game isn't completely closed-source; it uses SDL, libpng, zlib, etc.
Interestingly enough, this hasn't really stopped people from improving on DF after the fact. Just take a look at the dfhack and Text will be Text projects, for instance.