The EFF petition says that "router manufacturers are notoriously slow about updating their software -- even with critical security fixes on the way. Under the FCC's proposal, you could have no alternative to running out-of-date and vulnerable firmware." It's referring, in part, to an FCC demand that manufacturer's "describe in detail how the device is protected from 'flashing' and the installation of third-party firmware such as DD-WRT."
For its part, the FCC gave a statement to Ars Technica that "versions of this (open-source) software can be used as long as they do not add the functionality to modify the underlying operating characteristics of the RF [radio frequency] parameters." In addition, it told TechDirt that it clamped down in the first place (on 5Ghz devices) because "we had problems with illegally modified equipment interfering with terrestrial doppler weather radar at airports. Naturally, the FAA freaked out, and the FCC responded to this actual real-world problem."
Many folks are concerned that the overly broad wording will force manufacturers to just lock out DD-WRT and other open-source programs and be done with it. Others believe that with recent net-neutrality decisions, the FCC won't take any draconian actions. If you've got concerns, why not express them on the EFF's petition, where they'll be "viewable online one day after being submitted to the FCC public docket?" As the FCC itself put it, "this is, of course, why the FCC does notices of proposed rulemaking and seeks comment from the parties and affected stakeholders."
Update: An FCC spokesman gave Engadget the following statement, confirming that it doesn't want to ban mod software completely, even if it increases WiFi power levels. Rather, it wants manufacturers to certify that their devices "cannot be modified in a way that causes harmful interference."
In the Notice of Proposed Rulemaking the Commission proposes requiring manufacturers to certify that the RF parameters of a device cannot be modified in a way that causes harmful interference, including by the installation of third party software. We do not propose a ban on software mods generally, nor do we propose preventing software mods that alter power level or other RF parameters in ways otherwise consistent with the device's certification. As you note, we're seeking comment from stakeholders – including the user community – on how best to craft the rule.