The American Shetland is a different breed now than the 'original' UK shetland. The first UK Shetties were imported in the 1880's. The American Shetland now has closed books, meaning no outcrossing. Before the books were closed, (and it may be that they were closed, then opened briefly, then closed again, I can't remember) outcrosses were allowed with Hackney and Welsh (less common), and I believe ponies registered with the UK registery were allowed up to a certain time. UK ponies are no longer allowed in. The American Shetland has been established as it's own, distinct breed. The ASPC is actually older than the UK registry and, if memory serves, most if not all US horse registries.
Modern and Classic are types; in addition to those, there are newer types that are now recognized - Modern Pleasure and Foundation. You can have a Modern type with a Foundation seal, in theory. As time goes on, ALL shetlands will eventually qualify for the Foundation seal on paper, but perhaps not in size (Foundations max out at 42") or type.
"A" papers (folks tend to identify these with 'Classic-types', though not always the case, especially as time goes on) indicate no outcrossing in (crud, brain cramp) 4? 3? generations. These papers qualify for the Foundation seal if there are no outcrossings a generation or two further back. Type or height is not taken into consideration for the seal itself (or for letter designations for that matter).
"B" papers (associated with 'Modern-types') indicate an outcross within 3? generations. These are going to be more and more rare, and eventually will cease to exist all together now that the books are closed.
Type is a different ball game altogether, and one subject to much controversy. Modern-type ponies (without Hackney blood) existed long before the outcrossing shenanigans. Even the great King Larigo himself had pretty extreme movement by today's standards. Back in the heyday of the Shetland, they were all shown with long feet, shoes, ribbons and tail sets. Even Silver Crescent, whose lines are coveted by many Foundation breeders, had what I call "Wowza" movement in harness, which would likely be shunned in today's foundation classes. I've seen some pretty big winning Moderns with an 'A' after their number.
So letters & seals are honestly no longer related to type, and this will only become more and more true as time goes on.
Yes, they are all the same breed. It's sort of like the dog breed Dachshunds in the AKC. There's different sizes and styles available to suit any taste. Just like the QH, where horses barely over pony size are winning at Working Cow, and in the same registry, giant 16 and 17 hand TB looking horses are winning in HUS. And similar to the minis in that there are all different types of minis as well.
I don't know if you get the Journal, but the latest issue is all about Congress, and you can see the different types (and their similarities) in the gorgeous ponies shown in the victory pictures.
I think the outcrossing business is probably a black-eye on the registry, but history cannot be changed. We can only move forward and do what we can to restore and preserve this historic and diverse breed and ALL of it's stunning types.
Bed time...