Bracketed Capital Letter [duplicate]
Solution 1:
You're right about the spacing of your ellipsis "dots."
The Chicago Manual of Style does not require the bracketing of a letter whose capitalization has been changed when it comes at the beginning of a quotation. I hate bracketing single letters. As such, I would probably recast your quote like this (or similarly):
"It need hardly be said that shortness is a merit in words," as so-and-so reminds us. "Short words are not only handier to use, but more possible in effect; extra syllables reduce, not increase, vigor."
Here's Chicago explaining that this practice is okay. The rule is 13.13 in the 16th edition:
Aside from proper nouns and some of the words derived from them (see 8.1), words in English publications are normally lowercased unless they begin a sentence (or, often, a line of poetry). To suit this requirement, the first word in a quoted passage must often be adjusted to conform to the surrounding text. In most types of works, this adjustment may be done silently, as such capitalization does not normally affect the significance of the quoted matter, which is assumed to have been taken from another context. In some types of works, however, it may be obligatory to indicate the change by bracketing the initial quoted letter; for examples of this practice, appropriate to legal writing and some types of textual commentary, see 13.16.
Solution 2:
In your exemplar, since you are not quoting verbatim, and in order to make the quotation fit the punctuation and syntax of your writing, you have provided an ellipsis and capitalized the S, thereby drawing the reader's attention to these changes you've made. The person you've quoted cannot then charge you with misquoting him or her, provided the elided words and changes in punctuation do not alter the meaning of the quotation drastically!
The rule for punctuating an ellipsis when it breaks into a sentence before the sentence has ended is three periods with a space between the first period and the previous word, and a space between each subsequent period and the first word . . . after the ellipsis. When an ellipsis begins immediately after a sentence, as in your example, punctuate as you have done.
As Dave pointed out (citing the Chicago Manual of Style), the bracketing of a single letter is certainly unsightly, and even a stickler couldn't accuse you of misquoting someone by not drawing attention to such a minor alteration. Again, the governing rule would be not to change the meaning of the original drastically just to fit the syntax of your writing.
So if, for example, you elide certain words from the middle of a sentence and change the case of the first letter of the first word after the ellipsis to indicate the start of a new sentence, make sure the original meaning of the quotation is not altered.
Solution 3:
The ellipsis and bracketed letter are both necessary. The ellipsis indicates words have been taken out of something you are quoting verbatim from a source (as indicated by the ""), but are shortening for brevity sake or lack of relevancy to the point being made. The bracket letter indicates that the original quote from the source was lower case and thus the bracketed capital letter is inserted to be grammatically correct. This is at least how it's done using APA style and I think MLA too.