The rule appears to say with 2 outs, the batter becomes a batter/runner only when first base is open.
Literally, the rule does say that, but it's wrong.
I wasn't reading it right. I need to work on my reading comprehension.
Not really. You're not the first to pose a question about this wording. The error has been in the book for years.
Many posters have offered substitute language, such as:
. . . When the catcher fails to catch the third strike before the ball touches the ground, unless
1. First base is occupied and
2. There are fewer than two outs