The writing should be assumed to be subject to copyright still even though the code is open source.

In this case it sounds like Microsoft's Legal has taken the assumption the writing is applicable under the code license and is mostly seeking to enforce trademarks and brand (don't commercially release something implying it is a Microsoft-approved Zork) more than the writing, per Scott's wording of Microsoft's legal requests here: https://github.com/historicalsource/zork1/pull/3

Obviously, I'm not a lawyer, that's not legal advice, build commercial derivatives at your own risk and with your own lawyer's advice.