1. Is Facebook clueless, unethical or just unlucky? Why?

I think they are both clueless, and unethical. You are absolutely right, this is a complete trick, I read it carefully and said use the old settings for everything, but my wife, probably just clicked through. We already have strangers commenting on her photos. Which in my opinion means they could have already downloaded copies of them and found out other personal information.

2. Will Facebook's latest behavior result in more lawsuits and/or industry regulation?

I do hope that it results in a lawsuit or two, but not industry regulation. I just don't see how it could be regulated properly.

3. Do you trust Facebook with your information?

I do trust Facebook with my basic information, but nothing more than what I would give for a library card application. Beyond that no. It's just ashamed nowadays that I get emails in my inbox, which say I have an email at Facebook, that I have to go log in and read. Facebook is taking over. I hate single points of control or failure.