It's not a "flop". Many of the most respected tech bloggers have permanently deleted their Facebook accounts. I did so myself about a month ago when I heard that Zuckerberg called FB users "dumb fcks". Who cares about hooking up with people you went to high school with anyway?
Agreed. It's a change in direction. Facebook is no longer on an easy, upward, unchallenged trajectory.
A business plan to compete directly with Facebook no longer seems foolish. Regardless of Diaspora's success, the overwhelming support of $200,000 of real money proved that there is a hungry market for a Facebook competitor; someone just has to build it.