Although most of the crew are modified, the military representative was not. Any earth-born animal's nervous system would be affected similarly by a 9-Tesla magnetic field. Not a good recipe for healthy cognition.
The gist of that thread was that these aliens had such total control over magnetics, and such intelligence, that they could almost immediately reverse-engineer how our brains function, figure out our weaknesses, and take advantage of them by manipulating our brains with their magnetic fields. They were more intelligent than we are, at least partly because their cognition wasn't impaired by the parasitic loops of self-awareness.
At any rate, that's the idea Watts wanted to explore. He's the first to admit that the entire premise is very speculative. We know very little about how self-awareness works, much less what it's effects on other cognition really are. But it is interesting that what few experiments we have conducted are not exactly ringing endorsements for the superiority of self-awareness.
I think of Watts as sort of The Anti David Brin. Fun quote from his website:
I don't know if you read his end-notes from Blindsight (or care to), but you can actually download them here as a pdf:
http://www.rifters.com/real/shorts/PeterWatts_Blindsight_Endnotes.pdfHe describes in fair detail what he was thinking about when he wrote the book.