Why they entered the country, I seem to recall it had to do with legal needs that weren't addressed in other countries at the time. Why they would stay in such a country once the legal needs (perpetual trusts) are available in the US, UK, or other larger and potentially more stable jurisdictions I am not sure. The best bet would probably be to be represented in multiple jurisdictions.
I agree that it makes the most sense to try diplomacy first, whenever possible. If they could have set up their trust without offending anyone, that would have been better. But if there was no other legal jurisdiction that would support such a trust at the time, perhaps fighting for it on a legal basis was their only resort?
I don't see why this has necessarily permanently alienated them. It could be something they would get over in time. If they will not, the smart thing is to move the assets to countries where the government is tolerant. On the other hand, the fact that the Liechtenstein government was persuaded to honor their own laws on the subject argues in their favor on this score.
I don't agree that sovereignty is likely to disappear or that small countries will surrender their independence easily to their neighbors. Liechtenstein may stubbornly persist for thousands of years. Why should they change?