> 1. Would an exploit like this be said to be severe?  

yes i assume from your email that the url would have to recofig the server from the 
scratch then not serious but if any file can be deleted then it is serious 

> 2. Is the vendor right in their approach to this issue?

no, the vendor should release a full advisory about this and at a minimum release the 
patch for this 

> 3. How do I make public the vulnerability? (Vendor has given 
> permission for
> the same) 

google around the rain forest puppy's disclosure policy for this, it is really good 
for this 

> 4. Ok, I'll rather ask... *should* I make public details of this
> vulnerability? (Since I know of sites using this app server, and 
> they may be
> taken down if the exploit goes out)
> 

don't make it public without giving all the people affected a chance to protect their 
system, however you may release something like a one line description of this and 
*not* give details to anyone except the vendor 


-aditya


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