Web Open Font Format backed by Mozilla, type foundries (ars technica)

IIRC when the w3c consulted about eot, web fonts and @font-face the response they got from FLOSS users is that they wanted it for i18n (your case 2). And not because it was a good solution, but because no one was investing in FLOSS fonts, so they were not complete, and even when someone was creating a good floss font, users didn't know about it, because browser creators (proprietary and floss alike) studiously ignored them and made no effort to make web site authors of web site users aware of them.

Also the "look" part is oversold by foundries, there are maybe a score of basic font design (ignoring fantasy fonts, but fantasy can be handled by images just fine because no one sane uses for long runs of text), all the rest are variations on them, and most users would be hard pressed to find differences between some of those basic designs. (that's why font classifications are possible BTW, you have thousands of fonts, but most of them are just slight variations few care about)

> Given there are organizations already working on free font creation, if > they sent a grant proposal our way we'd probably look at it...

That's nice to know and the communication would probably have been clearer if it had been stated from the start up.