But this is about Steam client, not about SteamOS or Steam Machine. Valve has not locked up the Machine, its contributing to ecosystem and has not made it into "shelf product".

You should look at PS4 to compare.
They took x86 hardware, slapped BSD on it, wrote a closed source driver (probably adapted catalyst), ported device drivers and slapped an UI on the top.

How does this differ from PS3 or 2? It does not.
Have they improved BSD? No.
Did this cause BSD to have better drivers? No. BSD even uses ported drivers from Linux...
Has BSD become more games? No.

And now compare to Steam Machine. FPS - fps do not matter at all. Its only a question of optimization. Everyone loves them, everyone hates when they go down**, but they go down here not due to achitecture failure, this is fixable. You simply can't claim that SteamOS is failure because right now it has worse fps in some title. Windows had no fps - titles crashed, does this mean Windows is garbage solely for this reason? Of course, if you only goal is to have max fps for this title at minimum of investment - go ahead.

Steam client is type of content delivery and DRM platform. I have stated my opinion about that in post above, it was like that long before SteamOS. I prefer GOG here.

** there is also something called frame lag, which was very known for fglrx linux driver between 2010 and 2014. fglrx did amazing 200 fps, but the game all felt choppy - while radeon did 80 fps, but everything was fluid. For this reason, Michael Larabel from phoronix, has developed frame graph in addition to basic fps test, where the lag spikes became obvious. I am pretty sure you also know this from SLI/Crossfire on some titles.