The issue with adopting agile / scrum is that it's a lot more complex than just giving a few people some new roles, reading a book, and then magic happens.

You have to start with management who is completely committed to the switchover. A few have responded that their management 'used' the process in their experience. This obviously doesn't work.

There have also been several who have said the problem is that everyone around them is stupid or that management just needs to go get a few cowboys and get rid of everyone else. These are naive soles making this statement. The cowboys and the ones who are otherwise full of themselves are one of the biggest problems in forming a successful and productive development team. Management has to be ready to let some people go when switching over to agile/scrum. There are simply people who don't know how to play with others in the sandbox and they don't meet the requirements for what is trying to be achieved. The script-kiddies who are scoffing at even the discussion of agile/scrum and the various terms can be removed from the conversation immediately.

More effort needs to be put in up front on truly educating everyone on agile/scrum and determining what a particular shop's implementation will look like at the onset. Get someone in-house which really knows this stuff to help answer questions and to mentor. Invest the time up front to do some team building and to identify those people who are entrenching in an effort to protect their fiefdoms.

Finally, everyone has to be open to change. A particular setup that works in one shop may not work as well in the next shop. The entire setup itself must be agile and must be constantly refactored - agile/scrum is about much more than just the code.

Now... to talk about the question that was posed: Is it a bastardization of scrum and an otherwise poor decision to use your senior developers as scrum masters? There is no set answer to this because of all of the dynamics mentioned above. I would personally be suspect of a situation where the senior developers were just randomly made the scrum masters because the are the senior developers.

Scrum master is an important role which needs qualified people filling it. If your senior developers are truly qualified and that is the role they wish to play in the team, then the should not be forbidden from doing so. However, in many cases the uber-coders do not have the skills to be scrum masters. You can have a brilliant teacher who can't explain quantum mechanics (and doesn't need to) and you can have a brilliant scientist (who understands quantum mechanics) who can't teach. They can both serve spectacularly in the proper context and both will fail utterly in the wrong context.

It sounds like your company needs to invest in having a qualified and experience agile / scrum expert come in to assess the situation and consult on the appropriate changes. If management resists the changes then the problem has been identified and there probably isn't much that is going to succeed until that problem has been overcome. Otherwise, if there are some individuals in the way then those individuals need to be given the pep-talk of they can either work in the new environment and where it is going or they are free to explore the market for a place they are more comfortable with.

"But we can't do that. They wouldn't let us show Fine Living but NOT Food Network." Excellent... it's time to put the pants on and let them know that you won't be delivering either of their programs. How many advertisers are they going to get if neither of their channels are airing? This is really just a bunch of smoke and mirrors. The cable and satellite companies are fully in bed with the 'content' producers and are just using these false statements as props for pushing more crap that the consumer doesn't really want. I would be perfectly happy paying the same for 5 channels of my choice as what I currently pay for 30 or 40 channels. Just imagine how many more viewers the DIY channel would get if it wasn't hopelessly placed in the most expensive tier. It's okay for the channels that nobody wants to watch to simply die... that's the way it's supposed to work.