I spent lots of time adding and changing code on this. This needs to be installed into /system/apps to work correctly.
Instructions on pushing to phone via ADB.
Place file in tools directory of the SDK.
Open command prompt and change directory to tools folder.
Type "adb root" and hit enter.
Type "adb shell" and hit enter.
Type "mount -o remount,rw -t yaffs2 /dev/block/mtdblock4 /system"
Type "adb push Facebook.apk /system/app" and hit enter.
You may have to trash the Facebook widget is you had it up. Then simply re-add it for changes to take place.
If you just want to install the .apk. Follow the link at the bottom to just install. This one will work for non-root users as well.
Facebook 1.3.2 8/12
Facebook1.3.2.apk Direct Link
Newly updated version. 8/7
Gets rid of white on the compose screens, thanks to 928 for pointing these areas out. Also per his request I have made the friends bar linked to an image.
Version for not root users and people wanting to just install the .apk
Many thanks to haledroid for doing this