We're looking, it seems to me, at two historical newspaper business models driven into direct competition by a shared crisis. Community newspapers survived because they covered local news, which attracted circulation and local display advertising. Certain metropolitan papers, including the Globe as well as the LA Times and its offspring, built their franchises to a considerable extent on classified ads, which again drove circulation and display ads.
The Globe catapulted itself to leadership in its market by sacrificing the news hole to classifieds during WWII and after, capturing the expanding suburbs. The community papers and the Globe shared the same geography without much conflict for decades (and the Globe gradually became less dependent on classifieds); but now the Internet is destroying both models.
The classified piece has been diffusing for years, beginning with publications like the Want Advertiser, then the free "shoppers," now Craigslist -- these should not be left out of any discussion of the fate of newspapers. Meanwhile, the community papers really are being displaced by bloggers and other Internet sources.
The trouble with the community papers is that they provide very little journalistic value added compared to blogs -- mostly amateurish reporting, and very little editorial control, plus a lot of reprinted press releases. The trouble with the big papers is that they're very expensive to run.
The trouble with the web sites is that nobody has figured out how to make money out of them. I think it's plausible (though far from certain) that whoever owns "the" site for a given community will be able to make it profitable, so the stakes may be bigger than you suggest. What I don't understand is how the Globe can expect to win out. Is it possible that this is a ploy (like that stupid direct-mail advertising section, last time) to boost the Globe's perceived value in anticipation of a sale?