Basic site filtering is fairly easy — setup squid with one of the many filtering engines and click to filter the categories your interested. Additionally, making the computer lab highly visible uses public shame and humiliation to limit additional activity.
The real question — How do you filter Facebook? There is a lot of great content and features on Facebook, and its a great way to stay in contact with friends, but there is also a potentially dark side as well. Along with inappropriate content, there is a tendency to share more information than should be shared, and not everyone follows proper security and privacy guidelines.
Is there a way to setup campus-wide security/privacy policies for Facebook?"
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I already block Flash automatically, as it drags down performance and rarely adds any content.
There are a few cases in which useful content has been designed in Flash, but most of the time it is useless eye candy - and more often than not, just pure advertising. A great way to block most advertising that you do not want is to block Flash. Why would you not want to do that?