And they have started releasing client source code: https://github.com/appdotnet/
a16z is already getting a return, since App.net has been profitable for a while. It's all gravy since they've made it free to sign up. The user base is about 10 times bigger than last year. It's true we don't know how many new users are paying but since that fixed costs are covered, it doesn't really matter.
1) Most people weren't around during those times.
2) Those who were have either forgotten what it was like or have come to terms with what Twitter is now.
They have been starting to release the source code of the client applications they've built: https://github.com/appdotnet/
Or Pump.io, which (AFAICT) is a Facebook/Google+/Diaspora clone.
Why is the idea that app.net is a paid version
of twitter so pervasive?
Because this is exactly what it was laid out to be when it was first announced.http://techcrunch.com/2012/08/12/app-net-reaches-its-500k-fu...