The reason they wear hats!

Now I know! I could never figure out why Lubavitch were the only chasidim who didn't wear shtreimelach. Now Ha'aretz newspaper has found the answer.

It was all based on a fight for selection to be the next Rebbe after the death of their father in law (there were three sons in law, and the elder had been expected to take over as Rebbe until that time)

Even after his selection, the widow of the previous rabbi did not accept the choice and "did not allow the Rebbe to set foot in her house and also did not agree to give him the Riyatz's shtreimel [fur hat]. That is how the custom began of the Rebbe wearing a fedora instead of a shtreimel."

The article also explains why the Rebbe was so encouraging of children with special needs and dealt with the topic:

Friedman also uncovered interesting information about the Schneerson family: In order to preserve the family's distinguished lineage, there were many marriages within the family; these often led to the birth of mentally and physically handicapped children. The Rebbe himself had a mentally ill brother, Dov Ber, who was murdered by the Nazis in the Ukrainian hospital where he was hospitalized, and his memory has been obliterated from the history of Chabad Hassidism. Another brother of the Rebbe's, Aryeh Leib, turned secular, but Chabad followers tend to portray him as a very pious and righteous man.

However, I'm not so sure of the accuracy of this part. It may well be that the historical revisionists had a hand in it:

By the time of the Riyatz's death in 1950, things had changed, and he decided to make his young son-in-law, who turned out to be much more talented and charismatic than his older brother-in-law, the leader of the movement to bring people back to religion and "win over hearts" that he had begun to nurture. In addition, the fact that Gourarie had an heir was transformed from an asset to an impediment, because the son renounced religion and became a secular computer businessman, Barry Gourarie (later on, he even demanded the vast Chabad library for himself, in a scandal that created a storm within the movement for years). Friedman spoke at length with Gourarie and heard fascinating details from him about what goes on behind the scenes in the Chabad movement.

Mentalblog and the comments there disagree with the 'fact' that he was not religious:

When I visited Barry in Lennox Hill hospital in 1989 (a visit he did not expect) I found him in PJ's with a big league tallith katan over his clothes.
Barry always had a beard . He davened before the amud in his Yeme Aveilus and was makpid on the Lithuanian pronunciation.
His son in law Dr. Samuel Friedman is an Orthodox man .
In West Hartford, Barry was a member of the local Young Israel. In NJ he was a member of the large Orthodox shul then rabbied by rabbi Marcus.
As a grad student at Columbia University I recall meeting a undergrad from there (who is now a well known Israeli diplomat D.G.) who told me that Barry had an influence on his own views of Judaism.
Barry had semicha not because his wife said so, but because he studied at Torah VeDaas and there are hundreds of people in Flatbush who remember him well at that school. I saw his semicha .

Predictably, Failed Messiah had plenty to say on the article from Ha'aretz and the whole topic. Worth a read.

Kumah also has a very interesting link to what the Rebbe did and didn't say about the holocaust. Worth reading!

Time to get back to work. At least now I know why they wear hats