The retraction seems to be saying Facebook will make it obvious to new users just how privacy works. I've found that my friends tend to follow those notices, somewhat surprisingly. Facebook will let people know what's going on once it's happening, because you're right - a lot of people do care about privacy.

I don't see Facebook's going public as a bad thing, as long as it's not a mandatory change. Their feed system certainly works publicly: It's much more involved than Twitter, and it supports a lot of things people would use other sites for. I use it instead of Flickr for public photos. I'm thinking of switching my Vimeo videos over so I can close my Vimeo account and run most of my online activities from one place. I like writing private friend-based notes, but if I didn't then Facebook notes would make for an attractively minimal solution.

Facebook's been gradually simplifying itself. I don't see how it's dumbing down when they've been adding features rather than taking them away. The new live feed is incredible, for instance.