And companies that want to take advantage of freely available volunteer run hardware/physical projects wouldn't want to commit their own resources to improve them for their needs? I don't see anything about this model that wouldn't directly translate into these sorts of projects. Why exactly couldn't physically based open source projects have both paid and non-paid volunteers, just like software projects do?

Yes. Today. This was not always the case.

Consider this; at what point was the first person hired to work on the kernel? At what point were there a majority of patches submitted by paid workers?

^And then consider that up until that point, it was all unpaid. Just... think for a while, just think please.

This is true today, but it has not always been the case, and the FOSS ecosystem goes far beyond Linux.

Publicly funded research may also contribute to open source, 3d printed prosthetics.