Maybe so in these days of cheap high speed internet for all, but back in the day getting a DVD's worth of decent Free software in a day or two through the post for £30 could be seen as a bargain. It may take months and cost many hundreds of pounds in phone calls to fit that through a 56k modem. The same may still be true in some parts of the world.
I mean I don't doubt some vendors are unethical, but to think it's any different from a car dealer is wrong. he is massively overcharging people day in day out for vehicles he may have picked up much cheaper at auction.
I get the feeling you think selling a debian CD for £1000 shouldn't be allowed? why not? I can buy a Win7 CD and sell it for whatever I wish, imo it makes no difference if the original source of product is free or low cost. a free market is desirable.
On the other topic, I doubt your brother should consider licensing v.1 under GPL a mistake. maybe, depends what happened. But I'd imagine in that time he got a fair few users, who provided motivation to keep developing, maybe also gave valuable feedback and ideas that made construct v.2 what it is today. Maybe giving others the right to distribute earlier versions was critical in gaining a user base, maybe not. Maybe it would have been the same if it was just a freeware / shareware, or maybe the development would have been ceased six months after the last download, once everyone moved on to some other more attractive competitor that appeared. who knows. All you do know is you have a product you consider valuable today, and it came from that heritage. So I wouldn't consider the heritage a mistake