This is one of those cases where distribution really matters; for quite a lot of the work we do, AGPL would probably be fine (to-order in-house business tools;client pays for development, gets source anyway).

While selling those tools under AGPL certainly would be both Free and open source (but not gratis!) - the only real impact of the AGPL would be on our client - in that they'd be guaranteed the four freedoms (but they generally specify that in the contract anyway - they want the possibility to continue development in house, or with a possible new partner down the road).

However, the products are proprietary in the sense that our client only ever use then in-house and don't distribute them or expose them as public facing services. So no redistribution.

So you're technically correct (the best kind of correct!) - I just think the distinction is important, as you certainly could sell software with AGPL components.