I think it's good that google will release wave code into the public domain. I hope the code helps kill the centralized internet. Personally, I think it failed because of the "google doesn't get social" problem. Look at Orkut. Does anyone in north America know it exists? The major users of Orkut are Brazil and India. It lacks polish and the UI is a bit cheesy and has that microsoft smell.
The biggest problem I had with Wave is that I could find no one to talk to in wave, and no one found me. I think google's efforts to evangelize and explain wave were pathetic. Now that Google is dropping it, maybe the open source community can do something great with it.