The evil part seems to be entirely a religious issue ;) It's not evil in my eyes. Keeping it closed is entirely up to you. I pondered the same concepts myself, started writing business plan. One thought was to do what some software companies do. Keep the newest version closed source and release the older version. In the case of your application though, I think it would benefit a lot from being open sourced. Having other people upgrade your software is cool.

As for making your money, are you a hosting service?? I'm not sure I understand what you do. Do you offer web development services or sell software? Sorry for the confusion, I think maybe it would help you to try and be concise about what you do for your clients :) Or is this tool just a bonus prize your clients get for working with you.

My company has a rather large client that had a content control system written for them. They then contracted a whole bunch of over qualified consultants from my company to sit there and click buttons and pull down tabs for them for their web site. Instead of letting the consultants write the pages by hand (which would of produced higher quality results).

So you see, even if you give them the software they might want to do something silly like contract you to use it for them.

You might want to also look at ActiveState's business model. Businesses don't like to use open source if they cannot get a contract with someone to maintain it in the event of a failure. So support contracts are pretty neat too.

Oh well, not sure if all of this rambling will help you. I hope you get the advice you are looking for.