Doesn't the license conflict with itself? The "not-yet-Apache-licensed" code is obviously derived from the "now-Apache-licensed" code, thus it must be "Apache-licensed" too.
No, but that challenge would exist if it was GPL which is why a hypothetical FSL-GPL would not be possible.
If I write software I can release it how I want. I can release it as gpl. If someone approaches me wanting a closed source version I can do that.
If I submit a patch to the Linux kernel I can also give that patch to Microsoft to put in Windows.
The closed code isn't 'based on' Apache code. The copyright holders have released the older code as Apache.