We use JFBConnect with Joomla 2.5.
Here we have the problem that new accounts that sign up the normal way (non facebook) can't login.
We set JFBConnect as component for registrations and set account activation by user.
Users then get the email with the activation link and can activate. But when trying to login it says "no permission" and in our backend these users are not released.
We prepared an admin account for you to check the settings.
Glad to hear you got things going. If there's anything you think we should know about how you fixed things, in case you think it's an issue with JFBConnect, please let us know.