> - driver can reveal internal workings of their “proprietary” hardware

Every, somewhat solid, HW engineer from the competition will be able to still grasp those inner workings from a proprietary driver and the HW itself. In the end they cannot just copy (most) things over due to facing potential legal issues, no matter if the driver is foss or proprietary.

> - they use driver features to further differentiate their hardware product > But really it’s just old tradition and paranoia

Agreeing here, albeit AMD and Intel seem to have (somewhat) grasped that it doesn't need to be that way.