What a load of crap. The FSF has always had the same goal, Freedom of the code itself. It's not about the developers, the GPL's goal and Stallman's goal has always been to make sure that the software remains open to everyone. No one can take GPL source code and close it down.
This entails that the end-user needs to be able to ask for the source (it's not obligated to provide it with the binary, a written offer for it is sufficient), modify it, rebuild it and run it themselves on their own accord.
However, the App Store model prevents this. It's as simple as that. One developer who contributed code thinks that his rights are being infringed upon and has written a complaint.
The point is, the App Store prevents users from accessing code on their devices, no matter how you look at it. You need to jailbreak the phone to be able to run your own apps without having to go through Apple's distribution channel. People directly involved in the VLC project, not the FSF, are now arguing that this is contrary to the GPL's intent.
There would be two questions: What is the legal situation, and what purpose is served by the whole matter?
First, since all iOS apps just like all MacOS X apps are packages, it is very simple to include the complete source code inside the package. Anyone wanting to put GPL'd software on the app store should do that, because then there is no question about delivering source code anymore. I don't know if the VPN guys have done this; if they haven't it is probably a good idea.
Second, you don't have to go through the App Store to install software on an iOS device; you can install on up to 200 devices if you are a registered developer. Yes, it costs $99 per year, but the original developers paid that as well, so it is completely unreasonable to complain about this.
Third, there is a very difficult question what role Apple plays legally in this. If I write an application, put it on the app store, and you buy it, did you buy that app from Apple, or did you buy it from me and Apple was only helping me by supplying bandwidth and handling the monetary side? I'd say it is very similar to buying from eBay.
But the other side is: What purpose does this serve? I can download VPN, install it on an iPad, and get the source code. At that point, I am able to use this source code for creating a different application, just as I can write my own source code to write applications. There are obstacles, obviously. If I want the code to run on an iPad, I need a Mac, need to download XCode, need to learn Objective-C (now I have everything to run the code in the iPad emulator), and pay $99 for a developer license. But there are no obstacles that you don't get elsewhere, you need a development machine, tools, and time. And there is nothing at all stopping you for example from making this code work on Android, or Windows Phone, or a Blackberry, at least nothing from Apple's side.
So my conclusion is: From the "open source" point of view, this is an own goal (which is why apparently most of the VPN developers are annoyed with this. If I was one of those developers, I'd write to this guy asking _exactly_ which lines of code he claims to have copyright on, and then replace them). Clearly, most of the developers _want_ this app in the iOS store. And clearly, people _can_ get the source code and modify it and pass it on. From a legal point of view, it is quite unclear whether this app can be on the app store, but Apple is quite in the clear as long as they remove it as soon as somebody complains. So the only ones that can be legally attacked are the ones who did the actual work. Nice move.