Rooting the tree - and finding the cenancestor?

A study done by the EMBL in Heidelberg, Germany, has reconstructed the universal tree of life shown here by eliminating lateral transfer (genes crossing taxonomic lineages, increasingly shown to be rampant in bacteria). Using a number of genes rather than the single gene trees previously done (16sRNA, a mitochondrial gene), helps present a more accurate tree.

The tree strongly supports the hypothesis that the last common ancestor of all life (the cenancestor) was a gram-positive thermophile, which means that the cenancestor evolved in high temperature environments like volcanic pools or black smoker thermal vents on the sea floor. "Gram positive" means that the cell walls are composed of a particular protein, peptidoglycan, which makes the cell walls thick and strong.

One interesting aspect of this reconstruction is that it notes how the phyla of the Eukaryotes (organisms whose cells have a nuclear membrane surrounding the DNA) are much "smaller" than the phyla of the rest of the tree, emphasising that this is an artificial taxonomic level, and is relative to the group one thinks are significantly different or not. They note:

As expected, the hierarchy of taxonomic groups correlates with phylogenetic diversity measured between and within them (e.g., species belonging to the same family have a shorter branch length distance than species belonging only to the same phylum). Within each taxonomic level, branch lengths distances vary considerably ..., apparently owing to factors that influence substitution rates, such as differences in life-style or population size. However, even when taking this effect into account, we observe a strong discrepancy between taxonomic divisions within Eukaryota and Prokaryota ... . Organisms that have been assigned to separate phyla in Eukaryota would clearly belong to the same phylum in the prokaryotic classification. Historically, eukaryotes have obviously been given more taxonomic resolution than prokaryotes, a testament to their greater morphological diversity.

Here I disagree - the morphological diversity of eukaryotes rests largely on the fact that some of them are multicellular, and thus exhibit differences we find striking, nothing more.