Does [GNU] AGPL-3.0 require open-sourcing the derivatives if the original work is open-source [= public]?
No!
That requirement would actually render it a nonfree licence, which would be ironic for a GNU licence.
Is the paragraph misconstruing the AGPL-3.0 license
Yes.
Moreover, not only that paragraph, from the very first word: ‘OSI’ this piece of text misconstrues the context, intents and of purposes behind GNU (A)GPL.
Based on my understanding, AGPL-3.0
Reading the licence itself, and its preamble in particular, you must have noticed, that it says absolutely nothing about ‘open source’.
If you go a bit further and follow the hyperlink in its footer, you will find (maybe to your surprise?), that itʼs primary author (Dr. Richard Matthew Stallman) is a very vocal opponentopponent of Open Source.
In 2024, in English, saying ‘open source’ is often just as matter of choosing a mere synonym for the original ‘free’, that is way less ambiguous, and is free of unwanted (in some cultures, and thus in international corporate context) connotations.
But in in the eyes of their respective envisioners they were not synonymous. And your question nailed the most crucial difference!
In RMSʼs (and thus Free Software Foundation and GNU Project) eyes, the freedom to distribute software to anyone, including to no one, i. e. to enjoy it privately, is one of the four most essential ones, that any free licence must guarantee.
And of course, GNU own licences, Affero GPL v3.0 included, do that.
But the aforementioned OSI (Open Source Initiative) never took this stance.
On the contrary: they tried to draft and promote severalapproved a couple of licences, which indeed included such a requirement — to ‘open source’ (to share) all your modifications with everyone (Reciprocal Public License v1.1, or at least with the upstreamRPL v1.5).
Thankfully, nobody really cares about OSI, so your probably never heard of them. ;)