YC does
not go along with unethical practices. I'm not involved with that side of the business but they're serious about it and have disowned companies (by returning their investment and excluding them from the YC community) for being unethical.
I'm confused about what the issue in this case is. It sounds like some people are complaining that the product isn't open source because it's not self-hostable, while the founders are saying that it both is open-source and self-hostable? This sounds like a misunderstanding to me.
Even if it's not a misunderstanding, but rather a difference of opinion about how words should be used, that's not likely really an ethical issue. Rather, the definition of 'open source' is a classic flamewar topic that people regularly post zealous denunications about (including fiery charges of unethicalness and the usual "you should be ashamed" etc.). Of course this is not helpful—it just leads to flamewars, which are off topic on HN, and makes clear communication harder.
It does seem like "open core" is emerging as a term for startups that have open-sourceiness in some sense but not in every sense. That's one way to short-circuit flamewars and we've helped at least a couple YC startups launch themselves that way. But I don't know if it would be a solution in the present case because I don't understand what the issue really is.
(I'm not saying any of this because I think you personally need to hear it! I'm just posting it here out of caution, because if I jump into the argument directly, people will accuse me of putting a moderator thumb on the scale. We have to moderate HN less, not more, when a YC startup is involved: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...)