It’d be nice if someone could come up with an IP inventory of what Mattel/Hasbro actually owns with respect to Scrabble, and then lets talk about how those individual pieces of property might be infringed by Scrabulous. Could this all just be a case of “woulda, coulda, shoulda” on the part of Mattel not having protected the necessary parts of their IP with respect to Scrabble, and be a non-issue for Scrabulous?

You are correct, the million monkey argument indeed only applies to works that are protectable by copyright law. You are also correct that copyright may exist in the board, the appearance of the letters, the packaging of the game (does not apply here to the computer game), and the like. However, registration of copyright is not required to obtain protection. These days, copyright protection exists the moment the work is fixed in a tangible medium. Furthermore, displaying of a copyright-protected image on a computer is most certainly infringement. It is well established the computer and internet displays are tangible mediums with the copyright laws. Who is infringing? Certainly the makers of Scrabulous, and also any entity that assists or empowers Scrabulous to commit its infringement. Contributory liability is what the Scrabulous owners need to be concerned with.

Regarding trademark infringement, you are correct that similarity of the marks is not enough. The other half of the infringement equation is that the goods must be related, or the goods must be in the natural area of expansion of the registration owner. Class of the goods, however, is largely irrelevant. For example, if the registrant sells NIKE shoes (Class 10) and the infringer sells NIKEN shoe waxes and polishes (Class 003), infringement very likely would be found. The marks are very similar (but not exactly the same), and the goods are related. If the registrant sold NIKE shoes and the infringer sold NIKEN hairspray, there is not a great case for trademark infringement. Lastly, a disclaimer certainly serves to inform people that the goods are not produced or sponsored by a particular trademark registrant, however, the disclaimer would not absolve anyone of liability for infringement.

The million monkeys argument is only good if games are protectable by copyright.
However, games are not protected by copyright in the US. See USPTO website.

I don’t think there is an issue in other countries.

Is there copyright in the board? Possibly, if the board was registered in the US. In other countries, particularly those with the UK tradition, the game could have been a registered design, if filed, but that would have terminated by now.

Is displaying a copyright image of a board on a computer an act of infringement? Who is infringing?

As to trademark, similarity is not enough. The trademark has to have been registered in the apropriate class.There has to be a likelihood of confusion. If there is a clear disclaimer that the game is not licensed or associated with Hasbro or Mattel, perhaps that is enough.

Since the game is so wildly popular, I agree that Hasbro should look to buy it or find some other compromise that will allow its users to continue playing. Any solution that requires the game to be shut down will cause massive damage to the Hasbro/Scrabble brand in the eyes of the internet.

the best comment I’ve seen so far came from a comment in the slashdot story: “Don’t tase us, Hasbro.”