The "work-for-hire" contract described by the original poster is one of the standard ones offered by book developers-producers-packagers. There are also various royalty deals. What they offer depends on who originated the original idea, what kind of work you will have to do and what they will contribute, how much will your ideas contribute to the final product, etc. Everything is negotiable and you can always simply say "no." Your experience shows that they are open to changes in the contract. "Work-for-hire" means that you do not retain rights, so their inflexibility on that point makes sense. You didn't like it, so you declined. There's nothing insulting on either side.
You refer to "the man who founded the company." He is Paul Fargis, one of the most respected people in publishing, and for good reason. I have known and worked with him and Stonesong for 22 years, writing book proposals, contributing to books and writing entire books under various kinds of agreements. He and Stonesong have a reputation in the industry for ethical business practices and quality work. The poster wrote that Stonesong worked with "reputable (although not major) publishers." Well, they did The New York Public Library Desk Reference (to which I contributed) with Simon and Schuster. I believe it is the Quality Paperback Book Club's all-time bestseller. They also did Lifetrends: The Future of Baby Boomers and Other Aging Americans, published by Macmillan, which I wrote. I call them "major" publishers.
Book developers and produces are naturally in business to make a profit, so they may not offer a contract that has everything you want. But they also offer the opportunity to beginning writers to get published and make a name for themselves; for experienced writers they are a source of various kinds of work throughout their career. They helped me get started in the business. My agent began as an administrative assistant at Stonesong 20 years ago.
One final point. Stonesong was subject to quite a going over in the original post. Businesses depend on their reputation, and I am perplexed at why Writers Weekly did not contact Stonesong to offer them a chance to reply.
Stonesong is a book developer, and while they've worked with plenty of reputable (although not major) publishers and licensors, I would simply advise everyone to be CAREFUL. I was contacted by them last year and requested to do a few pages on spec for a book idea they had. I agreed ONLY because I thought the idea had tremendous potential. They liked my pages and were willing to enter into a contract. They sent me a copy of their standard contract as a base from which to start. Now, I had been told it would be work-for-hire but that royalties were possible. Still, I had done work-for-hire in the past for a publisher and had never seen such an insulting "standard" contract! Not only did they strip the writer of all rights "whatsoever forever," but they had a clause in it that would require the writer to maintain all LIABILITY. 0% rights, 100% liability. (Since my book would be self-help and primarily advice - NO WAY!) There was no clause in it for even the CHANCE of royalties with the publisher, and the writer would have to comply with the publisher's contract outright without even having seen it. Of course, I protested, and they actually agreed to relent on all issues except for rights. Under the circumstances, I was simply unwilling to relinquish my rights to my writing, even though they agreed to my other terms, and the deal fell apart. I already have 5 non-fiction books, so there was no way I was going to relinquish rights to my work after finding out how they customarily do business. They took offense to my telling them that after having seen their standard contract, I wanted nothing more to do with them because if they entered into that sort of contract with any writer, it was exploitation pure and simple. They were concerned I would blacklist the company, and the editor I worked with told me the man who had founded the company was one of the finest people she's ever met. That may be true, but this contract was abominable. I told her I'm not in the habit of bad-mouthing, but I DO feel it only fair to warn my fellow writers. I'm not saying not to do business with Stonesong, but I AM saying to speak to them about contractual issues prior to doing any work for them.