It seems like the project is meant to show that they understand the frustrations of people who didn't understand where the Game Engine was gone. And in the same time, to develop / polish Blender in regards to game development.
The question stands though: Is DOGWALK even Libre?
Something can be Libre without it’s initial distribution being free (as in beer).
That’s how many distributions used to do it in the days when CDs and floppies etc weren’t exactly free.
The difference here is that the game is gratis. Its the source code that initially didn’t come with the game you get.