Hostile empathic transfer has two different versions, the Expanded Psionics Handbook/SRD version that you quote, and the Complete Psionic version.
Complete Psionic is a mess of a book written by avowed psionics-haters. It unnecessarily nerfed a huge number of things, despite the fact that supplements are not, under the rules, authorized to go around rewriting other sourcebooks (that would be for errata). It is widely, and strongly, recommended that you ignore it with the possible exceptions of ardent, Practiced Manifester, and soulbow. Hostile empathic transfer is not on that list, and I will echo the consensus and recommend you ignore the Complete Psionic version of that power (though I will note that it says explicitly that you cannot transfer more damage than you have taken, which is only implicit in the XPH version—that is a good change, it just should have been errata; anyway, we’ll understand it implicitly from the XPH version anyway).
The key to understanding what the proper version of hostile empathic transfer is doing with its second augmentation is to correctly understand what it means to “affect” a target with this power. Affecting a target means you are able to transfer damage to them. How much you transfer to each target is up to you—but you are still limited in the total amount of damage you can transfer, which is either 50 damage or the damage you have actually taken, whichever is lower.
So you can parcel out that damage any way you like, and you get some range and avoid needing a touch attack, from that augmentation, but ultimately you cannot transfer more damage than you could to a single target that way—that is what the first augmentation is for. In most cases, touch attacks are easy enough, and distances amenable enough, that it’s better to either save power points or use them to raise the cap on your transfer than it is to use the second augmentation, but it still can be useful in a pinch.
