Hello Al,
Let me oversimplify / exaggerate a bit (but just a little):
FreeDOS is about providing a GPL version of DOS, extending over MSDOS capabilities (sometimes leading to bloat). It does not care much about 8086-class PCs, assuming that nowadays everyone has a 386+ PC. It comes with lots of third party packages, albeit it is very strict on licensing of software it includes.
SvarDOS is about creating a free (ie. not necessarily GPL, and in fact I tend to avoid this license) DOS distribution. It focuses on being lightweight and compatible with a 8086 PC with 256K of RAM. Its distribuable core is kept as tiny as possible (single 1.44M floppy). Third party software is available through the SvarDOS network repository (pkg / pkgnet tools), and is very open to a variety of licenses.
It is also worth noting that while currently SvarDOS relies on the FreeDOS kernel by default, it is possible to replace it with the EDR kernel after initial installation. Ie. SvarDOS is meant to be kernel-agnostic and works are actively made towards this goal.
For some further insight you might want to start here:
http://svardos.org/phpamb.php?fname=help/help-en&f=freedos.ama
Mateusz