Yeah FB Connect is a great idea! I think many of my potential users are probably already on facebook already.
As far as the TOS go, I'm a little too poor right now to hire a lawyer but the university near me has a great program where law students (supervised by a lawyer) offer free services to entrepreneurs. I'm signed up for that program but it doesn't start until June.
Any suggestions for how to fill that privacy policy and tos in the mean time?