There is still somewhat of an incentive to use PALnet though, so you award with your PAL, which does mean that you're possibly ignoring friends not using PAL.

? I'm confused. Maybe you're misunderstanding, but you can award Pal from any interface, the only incentive to use the Palnet frontend is if you want an automatic filter of only people using the palnet tag. There is no economic incentive to use it.

I think it might be a good idea for front-ends to choose to distinguish posts using these tags in the future as well.

I've already suggested this to Steempeak and I think they're working on something along these lines.

There is already a real advantage to use PALnet or just it's keyword. That in turn means there's a disadvantage for those not using it.

Well, that's sort of like saying everyone who declines payout is at a disadvantage to the people who don't decline payout. Yes, I suppose that's true, but there's a simple solution, don't decline payout(use the palnet tag)

When we do have a ton of different communities, it might mean that the community is segregated into a ton of different smaller communities.

Couple things, so if you post something on Palnet, it still shows up on the main chain, so again, these communities aren't walled off. If someone just goes to Steemit or Steempeak, they'll see posts from every community. But the other thing is I think this is desperately needed for Steem. Currently Steem is like Reddit without subreddits. That's why it's so hard for each user to discover relevant content. It will definitely(IMO) be MUCH better when there are tons of niche communities.