Does anyone have experience with it? I pretty much understand how it works but can't find any docs on if a Facebook users data is stored locally or how I would go about registering someone who doesn't have FB or just doesn't want to register using their FB account.

try this module?http://drupal.org/project/fbconnect

Their FB account data is most likely not stored locally (especially their password). It probably just stores some kind of key that links their account.

Looks like if they have an account on the site already the user has the option of linking their FB account. It would hopefully have a check for FB and just create a local user in the case of them not having a FB account.