After all, Kickstarter is not a store, so they're probably not going to be held accountable if/when things fall apart!
Kickstarter has the same accountability mechanism as real stores do if/when things fall apart. If you walk into a contractor's business and pay him $500 to make a fence for you and he doesn't make the fence, you ask for your money back. If he doesn't give you your money back, you sue him. If you win, you have to collect judgment. If he drank your money away and has no assets or wages to garnish or files for bankruptcy, you won't get your money. The police can't go over and beat up the contractor until coins come out of him, River City Ransom isn't real life.
Suing someone over $50 in real life is generally not worth it, and will probably cost you more than you earn from collecting. As a result, people rarely do it, except through class action suits against profitable companies. A class action against a company with no assets wouldn't work and so no lawyer would take it without payment upfront.
The same is true on KS. There literally isn't a difference in the mode of how you get made whole. The distinction that's relevant for the buyer is their expectation of the ability of the person to fulfill the contract. Giving someone $50 for something that's being done tomorrow is generally a safe bet. Giving someone $50 for a complicated thing that will take years to pay out is generally less of a safe bet. If you hire an architect and pay her now to do your house plans in 2031, don't be surprised when she is hit by a train in 2028 or moves to Mars in 2029.
People have these misconceptions about Kickstarter that seem to boil down to understanding how the real world works: largely it's based on trust. Trust is what should govern your interactions with KS as well.
One final note: I do think KS and Amazon should refund their portion of commissions from projects that do not deliver. This gives them a stronger incentive to screen projects to begin with, correctly gives them more stake in higher profile higher cost projects, and allows them to make it clear they aren't profiting off fraud, even in a hands-off way. But we're talking about 5-8% of the money, so if you get robbed for $100 you probably aren't going to care about getting <$10 back.
If a project doesn't hit it's baseline goal within the time-frame, all money is refunded to contributes and the duty of the project creator to fulfill stretch-goal rewards/project completion is nullified, correct?
The money is never taken to begin with so there is nothing to refund.
Is there any legal obligation from the project creator to actually do anything? Of course there should be, but is there?
If they don't make their goal? Why would there be. If I need $10,000 to make my cool 3D print alien meme art, and I get $0, where's the contract? A contract involves consideration: the exchange of some value for some good or service. If they do make their goal? They are obligated to deliver to the satisfaction of a backer, just like any other contract. What happens when they fail depends on the scenario and how you try to get a refund.
Can the project creator change the overall goal during the Kickstarter? Can the people behind this just say, "hey, for $500K we'll produce a smaller project"?
If you only needed $500,000 to produce a project, you should have asked for $500,000 to produce a project. Your option at that point is to start a second KS asking for less money and hope your previous supporters don't abandon you due to your increasing desperation sending a strong negative signal about your trustworthiness.
The problem is that the Red Ash team lied. The goalposts have changed. Instead of "pay to support this prequel game that might bring further installments down the road", now it's "BTW, there's already a full game coming, but if you pledge enough, that will be added in addition to this!"
There's no incentive to support this project when the creator has just stated that there already is a plan for a "real" game, but the project you're funding (and which probably won't even meet its goal in the first place) is just a glorified teaser that's nowhere near the scope they outlined in their KS notes.
That's definitely dishonest and frankly this KS feels like garbage (it's also the second KS by a team that frankly so far has delivered a seriously underwhelming looking product from their first KS) so I fully support anyone not funding it. But I'm also not super troubled by them revealing additional information about their strategy during the funding period. Any* pledger can remove their pledge before then, so to the extent that anyone is duped, they have an obvious remedy. I think someone who pledges day one and doesn't pay any attention to the rest of the campaign is basically making it clear that they don't really care about the details, so absent some scenario where they pledge on day one and then get paralyzed for 45 days with no ability to read the news, I'm not super sympathetic to someone discovering later they didn't really want to pledge.