Well, to answer the radio button question, I would assume that clicking on the theme gives you the opportunity to view a small preview of the theme before applying it, and the radio button makes the choice "definite." Although I guess highlighting the theme doesn't actually activate it -- you have to hit the activate button, which just negates what I just said.
solrac: I know that I was involved in a discussion somewhere about it, because I like to keep my system pretty "clean" and was worried about the stability issues and worried about mucking around with system files. One of the designers was involved in the forum and explained how it worked, which is basically just kind of like intercepting the system calls to the UI and redirecting them to the ShapeShifter, all in RAM... the way he explained it was a little better than that, but I know what I'm doing with computers and his explanation put me at ease. Just think back to the OS 9 days and Kaleidoscope -- sure, a select FEW programs didn't mesh all that well with Kaleidoscope, but since it didn't directly modify any files, it couldn't hurt your system one bit. That's ShapeShifter for OS X in a nutshell...
Here's a line from the Read Me file included with the installer:
"ShapeShifter is safe because it never touches the actual files and resources residing deep within your system."
Although that doesn't say specifically that it does it on the fly in RAM, that line combined with the discussion with the designer convinced me.