They have developed it and don't want it fragmented. Not out of fear of loosing the project, but because they consider rampant forking to be one of the main weaknesses of open source and Linux in particular[1].
Why is it strange to want to avoid dilution and confusion of your product? People can use it, modify it for improved performance, add libraries to it, include graphics and other files as necessary, and even charge money for what they've done with it. Pretty much the only thing you can't do with it is modify it significantly and re-release it as your own personal brand of Shen (whether renamed, or not).
It looks like a lot of work went into it, and they're basically gifting it to the community to use and profit from.
A more open license would be great, sure. But they have a legitimate position here, and they make a reasonable point. It may be myopic in some people's opinion, that's a matter of debate, but I don't see how it can be considered to be absurd.
[1] "Hence the production of derivative non-conforming programs from our source, whether called Shen, Shin, Shine or Shoo, is barred by the license. To give up on this is to give up on the motivation for Shen.
We are therefore not open source. Generally, the diversity and freedom to fork which was lauded as a strength of open source, has turned into the major weakness of Linux. This OS has been burdened by multiple forks, multiple distros, multiple apps for doing the same thing to the point where essentially the same work has been redone over and over again by different groups. The resultant wastage of effort has been huge and the result has been lack of cross platform usability, a lack of uniformity in the user interface, a reliance on complex dependencies and too often, software that reflects the scattering of human resources by displaying broken functionality. Even Linux fans are seeing this. This in turn has given Linux a bad name. We want to avoid all that."