Well, L1 is not stable anyways so you would also have to correct for that. Also, due to the fixed rotation Moon has mountains of ethernal light that could provide constant solar power.
And last but not least, the lower gravity on the moon (according to wikipedia) makes space elevators possible even with current technologies. As those would make space travel a lot easier, thats a huge argument to colonize the moon first.
And there's also the shorter transit time from Earth. Really, there are a lot of good reasons to think about establishing a settlement on the Moon before Mars. But I still think that trying to terraform the Mooon is a bit unreasonable.
And yes, L1 is unstable. But the lower bound on how little fuel you have to spend staying at the Mars-Sun L1 is much, much smaller than the Moon-Sun L1. I'd guess 10 m/s of delta-v every year for the Mars/Sun one and 10,000 m/s every year for the Moon/Sun.
And last but not least, the lower gravity on the moon (according to wikipedia) makes space elevators possible even with current technologies. As those would make space travel a lot easier, thats a huge argument to colonize the moon first.