I agree this smacks of desperation. They've been having trouble paying their authors for a while. Back in January they raised eyebrows when they sold off the front and back list of some of their biggest authors to a competitor.
The only genre that does really well in ebook form is romance but there are a number of established ebook houses specialising in romance already. Dorchester hasn't shown that they have any idea how to market ebooks or maintain a decent web presence - just look at their website, it's awful.
There's some further reading here:
http://www.smartbitchestrashybooks.c...thors-do-what/
http://dearauthor.com/wordpress/2010...e-and-digital/