Even though it is a long weekend in B.C., I haven't posted an entry in my FLOSS series for a while so figured that I would take the time to do so now.
Once you have made changes to a public domain item, those changes are copyrighted by you. This means that you can take existing public domain material and by just making a few minor changes to it create a copyrighted work. Disney is very good at doing this, with a huge number of their films being based on public domain material. While there is nothing to stop someone else from creating a Snow White from the original public domain sources, people automatically associate the work with Disney. Likewise, Disney lawyers don't like competition so if you do try to create your own version of Snow White, be careful not to take Disney created elements and use them in your version, even if they are logical extensions of the original work.
So, from a software standpoint, releasing your source code directly to the public domain is doable, but anybody who wants to can then take your source code, make a minor change, then start selling a product using your source code without compensating you. If the entity that is copyrighting your work is promoting their modified version you can end up with a situation where people are paying for work that you wanted them to have for free. In fact, if they promote their work enough, your original work may become an obscurity. They don't even have to mention the original work or who created it, so they may also be taking credit for your hard work.