I am totally late to the party here, but I thought I help clear some things up. :) I'm new here and I'm training to compete in western dressage.
The idea behind western dressage is basically "hey, we are using dressage for training in our western tack anyway. Why not show off our skills like English riders do?"
Aside from the idea behind it, the appeal of western dressage is--for me--you couldn't find a discipline more suited for me and my horse if I'd written the rules myself.
I'll be honest, I want to show my horse in event where we can be competitive. I want to piaffe and passage. I think my mare makes a cute little dressage horse, but all the training in the world won't turn my 14.3 compact half-Morgan, half-QH into a 17+ warmblood. While classical dressage can be used on every horse, the higher levels of competitive dressage require a very specific type of horse to be competitive as does western pleasure. Unfortunately, this isn't either:
While western riding originated with ranch work, it's used on many other disciplines that don't reflect working a cow. Barrel racing and western pleasure don't reflect anything involving a cow. Dressage was designed for calvary, but dressage horses today aren't going into battle.
At least at shows around here, competitive western horsemanship horses all move like pleasure horses. And I don't want to teach my horse to more that way because it doesn't directly benefit the other disciplines I compete in the way western dressage does.
Western dressage also does not require me to relearn to ride or my horse to be totally retrained. I'm a good western rider and competent trainer, but I suuuuccck at english because I have so little experience. I take English lessons to learn, but it still requires I use different muscles and cues than western. Western dressage is a more direct way to enhance our skills as a team for riding in other western events. Classical dressage would be helpful for my horse, but western dressage is more
For reining vs. western dressage, reining is a very specific discipline training for very specific skills. I love to watch reined cow horse because if you watch horses in fence work, you can see them move almost identically while working a cow as they do on a reining pattern. For example:
I already do reining with my horse, but mastering reining won't teach her every response I'd like her to have. But reining + dressage can give her more types of lateral movement to make her easier to handle in gaming events and on the trail. I want my mare to be the does-it-all type.
As for reins, western dressage calls for a little slack in the rein without losing contact. This is closer to traditional western riding than western pleasure's super long and baggy reins. The picture posted earlier in this thread had too much contact IMO, however the horse was also riding in a snaffle. You can't ride in a curb with that much contact because the bit is not designed to work the same way. It looked like a English horse in western tack, as opposed to a western horse using dressage principles.
Finally, I like the idea of combining western and english. I've seen too much hostility between riders and I think it's beneficial to have more in common. :)