I missed the first 20 minutes or so of the episode, and then there was a horrible tornado/flash flood in Eastern Colorado that preempted the telecast, so I only saw the ending. But I got the gist and if the intention was to do a sort of one-off "Alfred Hitchcock Presents"/"Tales from the Crypt" episode, I can dig that. And if they want to do more about all those beach characters we see milling around in the background, that's cool too.
The real question is why did the writers hype the episode so much? After this, Nikki and Paulo were supposed to be iconic. The episode was supposed to include a game-changing event that would forever alter the series.
Based on what I saw, that didn't really happen.
There were nice bits in the flash-backs, but nothing we haven't guessed at or surmised. The Rosencrantz and Guildenstern story was completely self-contained and won't really have any bearing on the big picture moving forward.
I'm planning to rewatch the episode just so I can see the whole thing uninterrupted. Maybe I'll find something surprising in the first half?
I wonder if there's still anything to the rumor that Desmond changed the time-line during one of his time-traveling flashbacks and that Rose and Bernard were replaced by Nikki and Paulo.