I agree 100% they're using "with Chester Bennington" for legal reasons, but in Dean's defense, he was probably coached to say that thing about false advertising. Also, good catch on Eric's drums -- I'm sure that was for legal reasons too.
Honestly, the whole lawsuit thing just sucks and is bad karma for both sides. They should both drop them. Yes, it's a business, but that business happens to be doing what they love and they've been extremely successful at it, which is way more than most people on this planet can say about their careers.
Scott's not going out as STP, and he can't be making that much off playing the tunes at the Moodswing Lounge with the Wallabees. Let him go out as "formerly of STP" and let him play his versions of the tunes -- he did write the vocals. He's just not inhibiting the band's future that much, especially now that they have Chester.
As for past damages, well... this is rock and roll. Shit happens, especially when you're in a band with an addict for 20 years. And it's not like they all woke up one day and Scott had suddenly screwed them all over. They have been putting up with Scott's issues for a very long time, so the argument about past damages doesn't hold any water to me. They apparently had this agreement since 1996, and they could've cut Scott loose at any time, but they chose to ride it out with him, knowing how his problems were affecting the band.
My best advice to STP, as a fan, not a legal expert: Have Skip Miller contact Scott's lawyer and agree to drop both lawsuits, cut your losses, and move on. Let the music speak for itself.