Not a fan of the SX family, but you have to give them credit for recognizing relatively early on that something wasn't working, and actually implementing the significant changes to try and make it better.
Actually it sounds more like they have completely changed their business plan.
Before: Provide communities and companies the software and hosting that enabled the creation of high-quality Q&A sites.
Now: Create a carefully cultivated garden of user-maintained Q&A sites with active communities and minimal overlap.
And that's fine of course, but it seems a little odd to judge the former was failing (after what, six months?) by using the goals of the second as a criteria for success.
Their new business model is more complicated than their previous business model. The five steps to citizenship seems like a weird concept. People that want to host a Q&A site like these don't want to be told they aren't good enough to have a top-level domain. Imagine wanting a blog and WordPress or Tumblr thought you undeserving of a top-level domain. Stack Exchange 2.0 has more steps to have a top-level domain site than the Chinese government has for it's citizens to acquire a domain. I'm sure there is a good Rails/PHP Q&A clone webapp.
A Q&A site is not a piece of legistlation; it's an entreneurial endeavour.
It's best to leave entrepreneurs to be free to create, experiment and adapt.
Stackexhange will miss out on some great sites by rejecting them before they even get a start. The best sites will be those where the founder/s constantly adapt the site to demands of the community, not those who have the best idea upfront.
But as you say, that's where the OSS optios come in. :)
Well it's not really like anyone will be running these sites independent of Joel, Jeff and co. So really this is just a mostly automated method of spinning off the software and getting a vibrant community at launch like SO had rather than stabbing in the dark at what people actually want.
Imagine wanting a blog and WordPress or Tumblr thought you undeserving of a top-level domain.
And just look at how many crap blogs are on each of those platforms. Their goal is to curate quality content and the free-reign model has already proven itself to be incapable of it.
Before: Provide communities and companies the software and hosting that enabled the creation of high-quality Q&A sites.
Now: Create a carefully cultivated garden of user-maintained Q&A sites with active communities and minimal overlap.
And that's fine of course, but it seems a little odd to judge the former was failing (after what, six months?) by using the goals of the second as a criteria for success.