Why the "technically"? It's an absolutely fair warning, and tells you exactly what it's doing.

Although I do agree with you, this information isn't something Facebook's app should be harvesting in any event... although the functionality itself would be tempting for a lot of people. Maybe they could only send hashes of your contact data, and compare it with hashes on their servers?

I'm not even convinced of that. Use MobileMe? Your address book gets synced with Apple. Have an Android phone? It gets synced with Google. Maybe Plaxo? Same deal. This should be treated the same as those solutions, as near as I can tell.

I should note that, unless I am missing something, the claim from the article that anyone can view your Facebook phonebook seems incorrect to me. The only way I can find to get there is to go to "Edit Friends." Even when I view the profile as my fiancée, who has access to everything in my Facebook profile, I can discern no way to get to that area.

This seems like a completely fabricated story designed to scare users, which is annoying to me, because it's the boy who cried wolf: whenever a nothing story like this about Facebook surfaces, it's that much harder to people's attention when they do something legitimate.

With MobileMe, you have explicitly signed up for a service who's primary purpose is to share your data. Android is arguably the same situation, though you don't have any alternative so I would actually throw them in the same dungeon as Facebook.

Experience teaches us that the only consequences users understand are the ones they desire. Everything else is ignored. So, if they download their Facebook contacts to their phone and this also causes their phone contacts to be uploaded to Facebook, you will end up with some angry users, dialog or no dialog.