Of course you should not be misleading the public into thinking that use of the term wordpress is not allowed. Anyone can use the term wordpress in their domain name (with pre or post lettering) - What you do have control over is whether they use the term wordpress in their domain - and use the domain for Wordpress services online.

You don't mention this.
Example: I can by the domain name: blakeswordpress.com - that is perfectly legal! - But if I wanted to use this domain within WordPress services - that is against your policy unless I ask for, and receive, permission from the company.

Cheers,
Blake