It all seems very counterintuitive and you think that Twitter would be encouraging content creation and engagement on their platform as it creates defensibility for the service. Consider this: Twitter probably is positioned to spot emerging trends faster than any other service by being able to mine emergent links, etc.
I think this is going to leave a myriad of mainstream users disenchanted by Twitter locking them out of their friends list.
I signed up to Twitter very early (user id ~5000) and have been enamoured by it's growth and how it's established itself as the preeminent destination for open conversation and realtime search/discovery. There are a lot of smart people at the helm of Twitter and I have faith that they'll realize their mistake and fix it. Otherwise the conversation will go elsewhere and it would be a shame to see all that value dissipate.
Thoughts? Keep the conversation going on Twitter: @raja