I’m (apparently) lucky to have access to a copy of “Sherry, Manzanilla, and Montilla: A Guide to the Traditional Wines of Andalucía” by Peter Liem and Jesus Barquin (I bought it for our store’s library a few years back; @martin recently informed me the price has shot upwards of $150 for a copy now… good timing!), which has a wealth of well-researched information about wine from Sherry-Jerez-Xeres, and all its attendant misconceptions.
In the section on the history of Sherry wine, they have this to say:
In the eighteenth and nineteenth centuries, sherry for export was largely made as a dark, rich wine, usually sweetened and heavily fortified. This was not necessarily the case with the sherry consumed in the region itself, however: Thomas George Shaw, in 1863, commented, “One can no more drink, in Spain, the sherry usually consumed in England, than they can, in Oporto, the usual English port.”
It is during this period that we first see references to biological aging, or aging under the veil of yeasts called flor. All evidence suggests that this method was first practiced in Sanlúcar de Barrameda, becoming popular in the mid- to late-eighteenth century. These wines were typically intended for local consumption, and surviving documents lead us to believe that they were not fortified. At this time, stretching well into the nineteenth century, the wines of Sanlúcar were not considered to be sherry, but were instead seen as constituting a distinct class of their own.
Given all that, it seems to me that the Sherry Problem might be similar to the Champagne Problem, in that almost all the cocktail recipes being conceived farther afield than, say, Madrid, were probably using heavier, sweeter wines than what is currently available/popular.
To the question of what all that “pale” “brown” “dry” “sweet” nonsense was, I’d guess it was mostly just been a layman’s way of making sense of an evolving market that, by the beginning of the 20th century, was probably starting to include some of the “local” styles that may have previously been only available in Spain?