TLDR: Use the engine to make a game however you want, I don't care. It can be free or commerical, either is fine. All that you need to do is open source any changes that you make to the engine, as outlined in the LICENSE in the file.
I suck at writing README files so this is probably missing a lot of important info about how to use scenes, game objects, camera, etc. etc. but take a gander around the engine code and it should be easy enough to figure out.. I hope.
This engine is far from finished to the point that I don't even know if you can actually make a game using it yet. It's in like the pre-pre-pre-pre-pre alpha stage or something.
I wanted to open-source this now as there is zero advantage for both myself or Madnight Games to keep this closed source. Pull requests with fixes and improvements are more than welcome!
This engine is just a library that links into your game code and so you will need to create a new Git repository with the engine as a submodule, along with the nugget submodule that is inside of that.
If you wish to make your game run from an ISO and make use of the PS1 CD-ROM drive, then you will also need to make sure you have mkpsxiso.
In the cdrom directory you will see an example of an XML file that mkpsxiso can use. iso.xml and system.cnf have already been setup in such a way that they should be plug and play.
Create a new directory to store your game code in and run the following:
git init
git submodule add https://github.com/Forceh91/psyqo-madnight-engine madnight_engine
git submodule update --init --recursive
With this completed you can then copy the contents of the getting-started folder (Makefile and the src folder) into your game code's directory.
Now you need to setup your development environment. This has been explained in great detail in the "The toolchain" section of psyqo Getting Started guide so refer to that next.
Once you've got your toolchain setup and ready to go, you should be able to just run the following in your game code's directory.
make
If all goes well then this should generate a madnight-engine-game.ps-exe in a build folder, which you can then drop into your emulator of choice!
With the build complete and the ps-exe running in your emulator then you should see a grey scene with a debug hud on top with some information about FPS and Heap Usage.
Huge thank you to the following for their involvement in getting this engine started and understanding so much about psyqo; along with the PS1 and its hardware.