Hi my dear-
Haven't seen this post till your repost of it, but in defense of Lulu's product I actually ordered several photo books from them, both B&W and color, to see the quality before we started getting involved with Verbal there.
Thought the quality was very good, actually better than our offset printing of issues 2-4, so I wouldn't let this one post halt your project - you don't know what the files looked like that this person sent.
Since our project is still being laid out, I can't tell you what our experience was, but I certainly urge you to read all forum posts on this subject that you can before just abandoning Lulu. Or find a book or two of B&W photos that seems most like your project and order them from Lulu to see for yourself.
Good luck, please keep reporting what you find out here, and Keep The Faith!