You really are just a giant humanoid(or whatever your current form is) made out of bugs. Heck, you can even be grappled for the first few levels. Your reach doesn't increase to 10ft, but it doesn't decrease to 0ft either. You receive and remove only those abilities mentioned in the ability. It specifically grants you the ability to move into people's squares, it doesn't make you weak against aoe damage, it doesn't allow you to move through small holes, it doesn't prevent you from being targeted by targeted attacks, it doesn't make you immune to flanking. If the intent was that you turn into a pile of bugs, you'd probably get immunity to grappling immediately rather than at 5th level.
You still have hands as they aren't expressly removed through the ability. You could have claws, no problem.
The stated intent of the alternate natural attacks ability is to create an option for shifters without appropriate claws. I believe the intent is to give you the 2 natural weapons of your choice from pincers, bite, or stinger.