Just reading through the FAQ on the Microsoft Flight website http://www.microsoft.com/games/flight/#faq
a key word from the first section of the FAQ
From these statements, along with the fact (assumption?) that MS Flight will be free to play, It appears that Microsoft Flight (as opposed to MSFS11) exists primarily for two reasons: 1. To boost the games for windows live platform, which will surely be competing against other services like Steam and EA's Origin. 2. to take advantage of the micro-transaction business model, basically making it easier for Microsoft to get more money out of players.
Regarding the first reason, it would make sense for AI airplanes to be neglected, since the entire focus is online community interaction. This allows the developers to put more development in other more important places. While we do not have any proof, assuming that Microsoft does not include AI, then I am certain they have overlooked the fact that the MS Flight online experience would be 100% constant Armageddon airquake. (Assuming the world is not partitioned into servers, but partitions seem contrary to question 3 in the FAQ)
Regarding the second reason, which is something I speculated quite some time ago, This does not mean the end of 3rd party products for MS Flight, but it most likely means that the content marketplace would be a middleman for every 3rd party product that is released. Since the primary focus is creating a strong online experience for a large number of players, it most likely also means that all third party content would need approval by Microsoft.
This could very well mean the end of community freeware support by Microsoft. By modding your aircraft, you could gain "unfair advantages" over other player and acquire false prestige through achievements you earn, even in singleplayer. For anyone that does not believe it could go this far, I link this. Of course that does not mean that modding will be against the rules for certain, but I think there is a strong chance. Even if that was not the reason, high quality freeware airplanes and terrain is directly at odds with the entire marketplace idea.
Also, regarding Hawaii, it makes sense to start small and charge money for additional terrain. Does anyone have any screenshots that are not Hawaii? I will go as far to say I would be very surprised if Microsoft included the entire world for free in a micro-transaction based product. The positive part of this is that I also assume the terrain you do pay for will be much higher fidelity than if they had done the entire planet. It actually makes sense to offer Hawaii for free, since you get Island landscape to fly around in for free with the FSX demo.
Now that I have made lots of sweeping assumptions with very little basis, do not take my word for anything I have said above. A few concluding statements:
Do I think MS Flight is good for the MSFS community?
No, I think MS Flight is directly opposed to what made MSFS so popular, which is the ease of modability and vast array of free and cheap 3rd party content.
Do I think MS Flight will be good for Microsoft?
Most likely, it seems that they are trying to control their market to capitalize on all of the 3rd party content flying around while appealing to a larger audience at the same time.
I don't think MS Flight will be some terrible franchise ending thing like Sim City Societies, but it also probably won't be a next step for MSFS. It will be a step in a different direction, hence the studio closure and name change.