>There's the fact they're in the same basic industry and a realistic chance that Lamebook could be reasonably confused to be connected to Facebook by a normal person.
The basic industry is the web? That is a stretch. Does that mean anything else is in the basic industry of "physical things"?
Facebook is in the industry of social networking, while Lamebook is a 'lolpics' site targeted at funny things FROM Facebook. It seems like they are clearly doing what Facebook says they are (attempting to piggyback on brand recognition), using satire as a hook to get away with it.
Whether they will succeed I think depends on Facebook's ability to show that this use will harm their name / confuse their customers, and that seems doubtful. In a similar instance, Toys `R' Us successfully forced Guns `R' Us to change names; the case was made that parents would think that Toys `R' Us had a chain of gun stores!