No, unlike VS.NET, you do not need MS SQL to write a database app. Your rules are no 3rd party tool except the one you need to make the app.
Are you concerned that allowing 3rd party tools gives VFP9 an edge?
When you say no 3rd party software are you including IIS? First, Jeff made a SQL Server back-end a term.
Second, it is not a matter of concern. Jeff's post stated a "VFP app vs a .NET app".
Kevin