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For example, .../productabc-options.htm would now become ..../productabc/options.htm). Is this going to have a negative effect on our SEO?

It could, but I would refrain from making the change unless necessary for the reason below, and if it is necessary, I would make it, get it out of the way, and make sure you get it right this time. I have sites I built before I took the time to figure out how to make them extensionless and will not even remove the extension from them, because... (See Below)

Is this something that we should aviod for other reasons?

Cool URIs (URLs) don't change...
[w3.org...]

Also, since there are now orphaned pages should we put in some sort of redirects to prevent already indexed pages that no longer exist resulting in 404 errors?

Yes, you should absolutely redirect them to the new locations using a 301 redirect. You can find some great advice on how to do the preceding in the Apache Forum [webmasterworld.com], but make sure you know what you are doing before you actually implement any redirects or go playing around with your .htaccess file, because if you make a mistake you can not only break your site, you can create ranking issues without even knowing you did, until all you can do is correct them, wait and hope the search engines decide to rank your site again.

You absolutely want to redirect the old locations to the new ones if you decide to change, because link weight will pass through the redirect, but you also absolutely want to get it right the first time.