"Idiot paladin healers who weren't content with their niche"

You mean the niche of spamming nothing but Holy Light on every single fight? I've played a paladin healer in both Wrath and Cata - trust me, the latter is vastly more entertaining and challenging.

How is making Paladins more versatile "utterly retarded"?

So? Now you can tell a good Holy Paladin healer based on how well they manage their holy power, cooldowns, and how well they choose what spell to use in various situations. In other words, more management is required, which generally means that a more varied skill set is required (I'm avoiding saying "more skill is required" because that can be debatable, but that's what I think).

Remember back in the wrath days when paladins were expressly labelled as tank healers because they were the ONLY one who could do it?

Serriosly Wrath was for better or worse a wake-up call for Blizz. They couldn't keep ignoring the holy paladins need for additional healing spells, because 2 expansions that only had granted them stuff that made their existing heals more potent. We were at a breaking point, our heals were so intense on the tanks that Blizzard had to design heroic encounters with that in mind. Other healers barely stood a chance at keeping up the tanks.

For all the hate of the new model, it is very much needed. Cata brought forth 4 new heals and MOP seems to bring even more.

Maybe it's unfair or incorrect, but every time I see someone this livid about the changes they made to holy/ret paladins, I can't help but think, "Here's someone who just wanted to mash on the 'victory' button, top all the meters and then rub it in everyone else's face without regard to complexity." Making the right decision at the right time is a lot more rewarding gameplay... unless just hitting the "win" button is all you can handle.