An interesting counter argument has been put forward by Robert Scoble, who basically says that he does (and, he implies, everyone else ought to) act as if everything he writes on the Web is available to be read by the whole world, and that, if anything, Facebook's problem is not that it's too public, but that it isn't public enough.
Personally, I think both arguments have merits, but the key point for me revolves around expectation and trust. Facebook's Mr Zuckerburg created a site which started out as one thing (a private place) and gradually converted it into something else. The way he did it has all the appearance of subterfuge. Some argue that most users don't care - either know and don't care, or don't know and wouldn't care if they did. That might be true, but it's not the point. The point is that it's been done in a rather sneaky way.
I've not closed my own Facebook account, nor have I (tried to) ban my children from using it - in fact, I've just helped one sign up today. But I have made sure all the settings are for 'friends only' where possible. This of course won't stop some information leaking out, which is the cue for the next lesson, regarding which I agree with Robert Scoble: assume everything you post could be read by anyone, someday.