Changing the Story

About six months ago I received my rights back on a short story. It was a story from an anthology where all the back stories were intertwined. As a stand-alone, it doesn't have enough to 'stand'. So I've been sitting on it, wondering what I could/would do with it.

About two weeks ago, it occurred to me I could revise it to fit in one of my series. The thing is--it would take considerable change. I liked the characters. I liked the story premise. But in order to fit in my series, the hero would have to become an angel/shifter. The story would have to change location. And most certainly, it would need to be lengthened and receive a new title.

My question is this--how does the author convey to the potential reader that the new book was loosely (very loosely) based on a previously published short story? I once bought a book by a favorite author, only to discover at least fifty percent of the new book was based on another book by the same author. There was no author's note in the book--nothing to explain why entire chapters were lifted from her first book, word for word.

So. What say you? Is this a no-no? Will readers be annoyed if certain scenes seem familiar? The short story had a VERY limited readership. Maybe I'm worrying over nothing?

All opinions welcome.

anny