Well... I actually don't find it too much shocking. I'm starting to wonder if I'm weird
Anyway, I started playing SE III, and the change from shareware to internet publishing (or whatever its name is) was a big one, IMO a lot more relevant than the change from internet-only to retail.
First and foremost, SE IMO isn't really a niche game (you'll disagree, I know). It was developed (and sold) as a niche game (and as shareware until 2000!), though - there isn't anything wrong with it, but this shouldn't lead us to presume that it can't go well on the wider market just because it's indie (or shareware!).
Actually, many games published by Shrapnel aren't niche games - or at least their niche is wider than the one of other games; Austerlitz: NGV wasn't as "nichy" as BCT, for example. IIRC SEIV has been Shrapnel's best seller by far (really, really far, just check the number of posts in the forum): I suppose this means that it has a wider appeal than other titles.
Consider the changes between SEIII and SEIV: the concept is the same,
but while SEIII was developed as shareware, SEIV was a commercial game. SEIV graphics are obsolete (even in their format: uncompressed BMPs!), but they are still
much better than those of SEIII. SEIV's interface is needlessly complex, but I found the one in SEIII so annoying to even bother learning it (and quit playing even if I thought SEIII was a great game). And so on. Basically, SE III and IV are the same game, with a different development; there are still a lot of margins for improvements in SEV.
Please note that I live in Europe, so I might not fully understand what could be the actual consequences of the publisher change. I think the PC game market is very different here (or at least, I had difficulties understanding large parts of Shrapnel's blog entries on the PC game market status). BTW, I had both SEIV and SEIV Gold shipped from the US by courier. I think I spent more for the courier than for the game.
Now, what could be the consequences of being published by SF? I suppose you could still buy it online (although not from the publisher, I think), and still have a community and some sort of support (from Malfador at the very least). What else?
"Watering down the game" to increase its appeal to hordes of mindless frothing teenagers isn't a consequence IMO, as publishers don't write game code. They can ask the developers to do some changes, but I suppose Aaron knew this when he (willingly) chose his publisher, and thus anticipated the possibility of any such changes - the game is still his own, not SF's. Should he self-destroy his game in an attempt to gain popularity, it would be his fault...
Also, even if the game sets the new world record for worst sellers in history I don't think Aaron would be jailed for it, so I suppose he'd still be able to develop SEVI. By the way, the hordes of mindless whining kids won't be a problem
unless the game has some success, so the two fears are mutually exclusive
Last but not least, I wished to thank Shrapnel for publishing SE IV. A shareware SEIV wouldn't have been the same thing. I'll be back (for Dominions III).