They tossed Chris Hero for being slightly loose skinned around the waist. Steen has about a 6 month life span in the WWE/NXT before he's released. The WWE wants to make sure that the indy marks get what they want, and then will shut up about it.
He'll be fine going back on the indy scene.
From what I understand, it was more about his attitude than anything else. Management asked him to improve his physique to some degree but, allegedly, trying to get him to hit the weights was like pulling teeth. Based on reports, he simply didn't wanna do it. Hero had a weird body type; he was about 6'4" or 6'5", about 215-225 pounds with a long, lanky type of body structure. He wasn't fat, he was actually pretty skinny, but he had virtually no muscle tone.
With all the guys running around WWE who're built really well, guys who obviously know about pumping iron along with proper nutrition, I don't see how Hero would've had any real problem. He just didn't really wanna do it. Besides, it's not as if he was asked to go all Schwarzenegger or anything as there are lots of guys in NXT who're in shape with decent builds. Tyler Breeze, Sami Zayn, Baron Corbin, Sin Cara, Kalisto, The Vaudvillains, The Ascension, etc. are all in shape but none of them are Herculean by any stretch. When Brodus Clay was asked to lose weight, he went from 460 pounds down to about 350. He didn't gripe, didn't complain or drag his feet, he just did it. In the grand scheme of things, being asked to hit the gym to improve your physique a little isn't much to ask, especially when compared to someone dropping a good 100+ pounds.
As for Kevin Steen, I doubt he'll be keeping his name. Kenta and Devitt are both bigger names and are huge stars in Japan, yet they picked different names. Doesn't seem to have hurt Kenta all that much as I read a report a few weeks back that mentioned that Hideo Itami was among the most searched names on the internet in Japan.
The shirt Steen was wearing may simply have been something he wears while working out in the WWE Performance Center. If Steen's asked by management to drop some weight, I don't think there'll be an issue. Even though he looks heavier, I think Steen's only about 250 or so and that has a bit to do with his body shape. Again, with all the guys running around in WWE who know about nutrition, if Steen's asked to improve his physique or decides to do it himself, he shouldn't have any real problem doing so because a lot of those guys know every bit as much about how to maximize working out with a proper diet as any personal trainer or nutritionist.