Android is most definitely NOT entirely open source, overall, unless you mean AOSP, which is as much use as a chocolate fireguard. If you compiled Android from AOSP, you'd have a totally useless version of Android with all the useful parts removed... and what earthly use is that?
Also, they DO still use Java - Dalvik is a runtime, and a runtime means it's translating bytecode, which means it's Java (which is why Android apps are still written in Java).
There are plenty of open Android ports that are built entirely from the open source code. that are nearly identical to stoc android, just minus the google services.
You're still confusing two seperate entities
1. Android
2. Google Services
While Google Services exist and run on Android, Android itself is NOT google services. you can have full android platforms based on the android source code that do not contain google's services. There are a couple mods that exist already.
if you compiled Android, you would still have a working Operating System that can operate a phone, run apps, and all the same things a google services phone can, just however, it does not come with the play store and some of the 'tracking' things.
For Example: Amazon's android fire tablets are Android, but they do not contain google services.
in fact, MOST 3rd party ROM's do not come with google services and those require a separate installation
also: while code is still java (it can be other things now)
Dalvik is no longer the runtime as of 5.x.
4.4 saw the inclusion of "ART" runtime as an option, and in 5.0, ART became standard.