I thought the goal of this plugin is to neutralize Facebook Connect (i.e. facebook on 3rd party websites), not to disable Facebook altogether?

Indeed, but my view is that if you don't trust Facebook, you don't trust Facebook.

Not quite. That won't block www.facebook.com or static.ak.fbcdn.com

Yeah, [unfortunately?] wildcards don't work here, so you can't do something like *.facebook.com.

You could either list out all the domains or use something like dnsmasq or another DNS proxy that lets you define more sophisticated rules.

Edit: the advantages of the /etc/hosts approach are it's simple, and it works without additional software.

If you want to avoid facebook completely, why not just deactivate your account, or completely log out and clear all cookies, then never log back in on your machine? I thought that point of this plugin was to let you use facebook normally without worrying that another site would post on your wall.