If the device is sitting in a rack in a closet, that is a device intended for use only by remote users.
And I doubt Microsoft would agree to the premise that you could avoid the "no servers" restriction just by putting the server at a desk and plugging in a keyboard and mouse that nobody has touched in months.
This is simply not the case. Relationship matters a LOT here.
Microsoft's license is not like the GPL/AGPL in that there can be many random parties to it. There's not 10,000 forks of Windows each with a different rights owner who might hop out of the woodwork looking for a quick buck. The only relevant parties to their EULA are you and MS. If you are an enterprise doing existing business with MS (i.e. you aren't already pirating Windows), you simply aren't going to end up in court over some contract technicality taken out of context.
The danger to the AGPL is that there's unclarity in the language AND some rando you don't know and don't do any business with could potentially exploit it.
And many free software projects require copyright assignment (e.g. the FSF requires this), so in all of those cases you're not dealing with 10,000 different parties, only the one. If that party is litigious then it doesn't really matter which license they use, they'll still be able to find an excuse to cause you grief.
The ability for anyone to contribute is an inherent and intended feature of the AGPL, and it's something unique when compared to a traditional EULA for commercial software. The potential risks to this model might not be intentional, but they are nonetheless a result of the design.
>And many free software projects require copyright assignment (e.g. the FSF requires this), so in all of those cases you're not dealing with 10,000 different parties, only the one
To your point about arguments having nothing to do with the AGPL -- this is not part of the AGPL, and many AGPL projects do not have a copyright assignment agreement.
The bottom line of my point is -- risk is amplified by uncertainty.
[A little bit of uncertainty] * [a bunch of organizations who DGAF about us at all] = [possibly a significant concern]
[A little bit of uncertainty] * [one organization with a profitable, existing, and predictable relationship] = [disagreements are probably being settled by an invoice not a lawsuit]
If relationship counts then surely the fact that you will be dealing with one of the worst actors in IT doesn't help your argument much.
The clause you're referring to says you can designate a user, but that could have to be the same user who uses the machine locally, and then they can also use it remotely. The first clause still proscribes use "on a device for use only by remote users" -- so maybe remote use is only allowed when local use is also present. Has this theory been tested in court? Do you want to be the one to test it?
And common practice doesn't save you. Lots of companies use [A]GPL software too. Look what the Federal Circuit did with API copyrightability -- everybody had been assuming that wasn't the case forever. And maybe they're right to, if another court overrules it or narrows it into nothing or a new law is passed before it matters for anybody else, or maybe not.
Uncertainty is the default. Which is terrible, but nonetheless.