Another possible source is volunteer work. Have you done any volunteer work where you professional skills were used (even a little)? This is another more selfish reason to do volunteer work.

How about your management skills? This is something that seems always to be on an employers mind any more. And if you were the committee lead for something then you managed a team.

I've heard of more than one case where the so-so or non-performing staff are promoted to managers. They are richly rewarded because the boss knows they will be loyal as they fear leaving their present job.
However, they also have to do what the boss wants, including giving bad references to the bright and good performing staff. These staff are too valuable to be promoted or, worse yet, allowed to leave their current job.

If the yes-men don't do what's expected (e.g. give a good reference to someone the boss needs to keep), there are serious consequences.

The boss also bad-mouths the good performers to the performer (don't want them to get 'uppity') and competing employers. At the same time, the boos takes credit for the good work done by the employee just bad-mouthed.

Former project leaders are not good references because they are given special treats like consulting contracts to seal their lips. They suddenly don't remember how good the employee was to them and their career.

So there can be very good performers that are being played and are locked into their job because they can't find references.

Anyone have any options for these folks?

To Referring to You -

When you refer to leaving on your terms vs. your boss's terms, what are you really talking about? Will your boss fire you for looking at other jobs? Or bully you into staying longer than you want to? If you're valuable to your boss, he'll want to hold on to you as long as possible, right? In which case, you hold all the cards. Individual employees with good track records have substantial leverage when they consider leaving a position. Getting a good replacement, for just about any post-entry-level job, is a slow, time-consuming process for managers and they'll avoid it, or try to control it, as much as possible.

To Locked -

Go to your peers. If the organization is as dysfunctional as you say it is, talented people will leave as soon as they learn how things work. If you've been there too long to know any reference-providing peers (current or former), you have more of a problem. But you must have worked somewhere else, before this circus, right? And there must be someone there (or from there) who will vouch for your talents, right?

The best reference is a satisfied client. Find a part-time, moonlighting gig, doing something you love to do. Do it for a reduced rate if you need to, but get out there and do it. Your satisfied client would be the perfect reference.

Also, employers can give conditional offers. If you know someone who will give you a good reference, you can ask the interested employer to wait on contacting them until they are ready to make an offer, and it can be conditional on the references.

Obviously, references are only one of very many components to a hiring decision. Your skills are the #1 thing, and if you pass the skills assessment or technical interview, the personal references serve only to confirm what they already know.

Once you get the conditional offer, you can let your references know they will be getting calls. No problem if the boss gets wind of it at this stage. Forget about the possibility of being unemployed - if you are good, that will be very brief if it ever occurs!

Consulting is a good idea if you can do it. But most places where inside references are hard to come by also prohibit it. To do this you would have to put your current job at risk. Very few places forbid volunteer work. You can do it above board, and even get some help from your current employer in getting in assisting you get getting good references. Very few places would want to look bad for forbidding you to do this kind of thing.

Where I work, the only official reference that we can give is that the person worked here from x-date to y-date. We're not supposed to comment on their abilities.
I would agree that the non-current-employer-work, but professional references would be best.

Referring to you; It's great to be able to have good references, better if they can come from within your current company. But; there is another option... if you are as good as you say give your prospective employer a copy of you last performance review and ask the prospective employer NOT to contact your current boss. I've used this once before and my prospective employer NEVER called the other two references that I offered.
Good luck in the job hunt.