People who read HN, myself included, want more granular control, sure. I don't think most of Facebook's users would care or understand about the granular control -- I think a simple yes/no like Facebook has right now is probably the best option for most users.
I don't have a Facebook account so I may not be the best person to judge, but it seems like whether "most of Facebook's users would care or understand about the granular control" might not be the best basis for making a decision. In fact, I will go ahead and say that I disagree strongly that Facebook should base privacy control decisions on what most users want.
Most users of any service or product won't fully understand every single configuration option available to them. That doesn't mean we should give up on allowing configuration. And using the interface to subtly educate and inform users about their options is a worthy goal. But that doesn't seem to be in Facebook's immediate best interests.
Android also has a similar dialog when downloading/installing new applications that provides "all-or-nothing" control just like this Facebook dialog. I think it's bad there as well.
Unfortunately it doesn't work that way -- users are foolish and will shoot themselves in the foot quite often, all while blaming you. If there were an option to, for example, disallow sharing of X on app Y, users would click it without understanding why. Then, months later, since X isn't shared, feature Z of app Y doesn't work. But the user doesn't understand how this works (messaging in the app might make it better, but not all apps are going to do it right and not all users will understand anyways). Since it's broken, the user will blame Facebook -- Facebook is broken!! Except the silly user did it to themselves.
This has happened. Since most things on the site are an app, Photos is an app. There used to be an option which ultimately disallowed an app to post certain kinds of stories to your stream (I don't recall the details). You could set this option on the Photos app, meaning you would never see any more photo stories in your stream. The option was very buried, so people had to specifically go to Photos and turn on the option... and silly users did this, forgot about it, and then complained that Facebook was broken since they never saw photos stories. Nevermind that it was their own fault. This option has since been removed in one of the Platform permissions revamps recently (IIRC it was simply forced to "off" for all apps, with Photos and similar internal ones special-cased to be forced "on".)
iPhone apps would apparently have this problem. Simple solution? If the app can't do some function because of a user setting it pops up an alert with a button pointing to the place to change the setting.... pretty simple.
If you explain in terms of what it actually means, a large subset of people will and do care. "Huh? Farmville wants my phone number? What the heck for?"
No, they don't. And most likely, you don't want them to have it, either.
As a developer, you are responsible for asking for the information your app requires to function properly. You are required (by the Facebook TOS) to specify what information you will get, and how you will use it.
The user than has to choose if it is worth it or not, for this particular app.
If Facebook offered the users "more granular control" over what would be sent, this would result in apps not knowing in advance what information would be available to them, which would result in a pretty crappy user experience.
In other words, it's not really "all or nothing" as much as "whatever this particular app asks for, or pass on this app."