I think this happening wasn't wholly unexpected, and probably a good move for Notch's mental health.
0x10c kind of arose out of the haze following Minecraft's popularity explosion (For reference, it was announced on 3/31/12, a month before the XBox 360 version of Minecraft came out). Since then, a lot of things have happened to Persson and the people around him, both personal and relating to games, and he's had some time to acclimate. If he's like most people, Notch's head would be in a fundamentally different place now than it was at the time 0x10c's core ideas were fleshed out, and it's really hard to improve and expand a game you're working on alone when so much has happened.
The community's response is really interesting! Judging by what the article said ("The community will not use Persson's code, story or even the game's title"), the only thing they're really keeping is the game's environment and its core ideas (which are really cool! You have a space ship with a user-programmable computer, and a big open world, EVE-style!). I wonder how much of what is said about the project's organization is spin, though, because "several departments" sounds uncharacteristic of that community (or any smaller open source project, really), especially given the loose, idividual-oriented nature of other notch-related projects (things like the Catacomb Snatch remake[1] and the very splintered Minecraft modding community)