That's a good point. I think the difference is that instagram had an existing userbase and social ecosystem that complemented Facebook nicely as another content stream.

I don't think you will need a Facebook login to play games, but Facebook will likely monopolize any social aspects. Even if they don't overtly lock out other social players, I think that developers will be skittish to invest a lot of time and money developing the new Second Life with the risk of Facebook cutting them off at any point if they are seen as a competitor.