Out of curiosity, does anyone know of any licenses that forbid forking and or distribution, but make the software sourcecode available for individual modification/examination?
A custom license, like this one
Imho forking is a bad thing, and usually shows that a project is ill, whether it's because it's lead by too big egos, the codebase is a horrible mess, or whatever.
Well, in those cases a fork is more than recommendable, I think
I don't know if Funpidgin can be considered a 'fork' in the true sense of the word, after looking at the changes introduced in the program, this looks more like a 'mod' than a fork. Of course, if the program is further developed like their authors claim, I guess that later you can call it a 'fork', but I suspect that either it won't be, or it will be backported into Pidgin, after a time of discussion.
Forking can be a bad or a good thing, that depends on a lot of aspects. Examples of a bad fork are Compiz, which spined off Beryl. Beryl was a more feature-rich version of Compiz, but was also licensed under the GPL, unlike Compiz, which used BSD, that meant Compiz could not take code from Beryl, but the other way around was possible. Fortunately, as you may know, Beryl was abandoned and renamed as Compiz Fusion, which is expanded version of Compiz, but without requiring a separate codebase (thanks to plugins and external tools).
Other bad examples are ffdshow, Media Player Classic and Visual Boy Advance. After Milan Cutka, gabest and Forgotten, respectively, abandoned the development of these three projects (well, gabest claims he will come back to MPC at some point), a lot of forks appeared, and clearly it was a f****** mess, not only for developers (and, in the two first cases, codec packs authors), but also for users, as it confused the hell out of them (which is the best? which one should I choose?). After some time, various authors stepped up and decided to merge parts of the different projects and create newer ones with the resulting codebase (ffdshow tryouts, the two builds of MPC maintained by the guys at Doom9, and VBA-M), which finally injected some sanity to the whole situation (the Visual Boy Advance was a particular sickening one, because most forks focused on feature bloat, without particularly improving emulation accuracy).
But don't fear, there are good examples as well, WebKit being the most prominent one. As you may know, WebKit was up to not so long ago, the Apple-forked codebase of KHTML. If we look at the situation back then and right now, clearly the forking was extremely beneficial for everyone involved, and for many people more. A rendering engine used by an relatively obscure web browser is now the darling of software development companies, being used in Safari, OmniWeb, Konqueror, the iPhone, and Google's Android platform, while is also being introduced in Qt 4.4 as the default HTML engine, and effectively replacing KHTML in KDE 4. Hell, even the Epiphany team (another example of forking) replaced Gecko after using it during years with WebKit.
Other examples are the particular mods of certain Miranda plugins, that always implement newer and more advanced features compared with the original plugins, and end up being backported into the main plugin. Actually, the developers seem to like this, as it means the plugin is being improved in ways the original authors would have not followed (lack of time, lack of interest, etc.)
So, like everything in life there's no single answer, and only time will tell if Funpidgin was a good idea, or just another IceWeasel situation. And which path of the four outlined by Jeff Atwood will take.