Behold!

Question: Why isn't Visage Great and Terrible under the shapeshifting-based knack tree? Is it because Eye of the Beholder works better with it on the tree it's on?

Not really - Eye of the Beholder is where it is because it needs to follow Visage Great and Terrible, not the other way around.

Actually, Visage Great and Terrible isn't in the tree with the shapeshifting knacks - Detail Variation, Undeniable Resemblance and Unusual Alteration - because it isn't shapeshifting. The knack represents turning your positive Epic Appearance to negative or vice versa, but that doesn't necessarily mean anything actually changed shape - in fact, other than small cosmetic stunts, we would say it never involves shapechanging, because that's what those other knacks do. You could stunt small changes, like maybe your scars become prominent or you gain sores on your skin when you turn ugly, maybe your hair becomes perfect or your scent divine when you turn beautiful, but you won't actually change shape. And often, use of the knack wouldn't involve any shapeshifting at all, and the character has the exact same physical features but they are now supernaturally lovely or epically disturbing.

So Visage Great and Terrible doesn't actually shapeshift you into anything different outside the boundaries of small stunts, and therefore it and Eye of the Beholder don't need to be in the shapeshifting tree with things that do. We don't think it would fit badly there, but we think it works just as well in the tree that is about using the impact of your Appearance itself to affect those around you.