Bad move overall, imho. I've lost some respect for Seth Godin because of that letter. A more normal rejection letter would have been more appropriate. This letter makes him sound a bit too kitsch.
Oh, and Tribes needed way more than one sentence in the acknowledgements mentioning Here Comes Everybody by Clay Shirky. I'd just reread HCE before I picked up Tribes and I kept waiting to see something like "So, every example in the last three chapters and next two chapters came from this excellent book... "
Or maybe that's just because I got this reply not half an hour after sending in my app. :) Zing!
All of Godin's work is over-dramatized crap. That's his shtick.
Getting a personal "you are amazing" is very different from "you are amazing" sent to few hundred people. This is a bad choice of words IMO.
This was totally miscalibrated for the audience, UNLESS the overall audience really did find "joy" from it and we're just exceptions.
Part of what's wrong with so many of these internet-marketers is that everything seems to be positioned as various degrees of "super rockstar ninja greatness". There is never any bad, unmarketable, stupid ideas. IE: no one wants to put their reputation on the line by making a potentially bad call. So, he won't say that your proposal was disagreeable, only that other proposals were even more "super rockstar ninja great".
IMO, if he actually had something great to offer and was bowled over-amazed-stunned at just how great an idea was, he'd find a way to nurture that, not blow it off.