The interesting question which seems to have been lost here is; Is this both or none just contractual issue or is it now a formal selection criteria? If it is nothing but contracts then there is no reason KP can't play just T20 when he is downgraded come the fall.
According to Andy Flowers word it sounds like its a selection policy and not a contractual issue. The way the central contracts use to work,not sure now, is that players would be graded on their expected usage, and then paid a wage according to the grading.... with development and limited overs players getting a lower cut, and full 3 format players getting everything.
My pennies worth.... a player has every right to retire regardless of what he signs before.... its his body, and if the stress of cricket becomes too much then so be it. I also dont begrudge a player like Pietersen chasing IPL money in the latter stages (plus 30 now isnt he?) of his career because an injury or bad form can strip a career in a heartbeat, and even if not, a player can only make money till 35 ish realistically anyway, after which a small county wage can last until your worth it..... players in Cricket dont earn a great deal compared to footballers, and they could live 30 years without their professional career! I dont see it as greedy!
On the selection policy issue, you pick your best team regardless of past loyalty issues.... if you tell me KP isnt our best or second best ODI and T20 batsman then I can provide you with a list of professional help you need to seek.
As for the U-turn, again a player can change his mind after a bit of a rest, and also if rest is an issue then the ECB need to monitor players fitness and motivation levels.... if KP wants to pick when he plays but that gets the best out of him, so be it. Limiting your assets to get performance out of them is key.
I mean, KP had lean patches in his career, maybe this he come about from too much cricket and motivational burn out! I mean I find it hard to believe a guy struggles against mediocre spinners, when in fact at his best he had made Warne and Murali look like chumps (Egbaston 06, Oval 05 are too examples I could give...if you can smash warne out the ground 3 times in an over, and swtich hit murali into the stands, then Abdl Razzaq on a dead BD pitch should be nothing to you!!)...
I fall with KP on this one. I know he is an arsehole but he is too good to ignore.
And is a rotation policy that bad? Do we need to play a full squad in BD after a hard test series in searing heat? Could we not blood youngsters in lesser games? I know there is a n integrity of the game issue there, but in all honesty the ICC and ECB schedules and cricket overload has done that already!!