To answer your bottom questions, from my perspective.
Will it compete with bitcoin? Given the trend of people evacuating facebook, and the lack of trust from a growing number of people, and the perceived risk by those who have been deplatformed or simply witnessed their favored channels disappearing. There's going to be some challenge in adoption, since many will view a facebook wallet as something that might be taken away from them if they somehow offend zuckerberg.
Will it onboard people into crypto?
To an extent, for millions of people this might be their introduction to crypto currencies.
Will it open up further privacy invasions?
Given Zuckerbergs opinions on privacy, it seems that the INTENT is to get more information on their users. What better way than to have a direct line into their wallets?
Regulatory hurdles?
Zuck already acts as though he and his company are above the law. Little doubt that he will ignore any laws until they are finally enforced against him.
I agree, people should/will be suspicious about using the token concerning all of the issues they might face in the future.
It sure does seem like it. Will be interesting to see Zuck battle with regulators though.