None of us has read the "book" and I think we're all making a leap of faith assuming that this "humorist" would stick faithfully to his genre - whatever that is.
It appears that Franken AND Penguin knew exactly what they were inviting. Any publisher of volume would no doubt have dealt with copyright issues and wordmark suits at some time in the past - at least enough to know what to expect from something like this.
There looks to be no blatant disclaimer on the cover offered stating "Not Affiliated with News Corp" so someone not intimately familiar with either Franken or Fox may put 2 and 2 together and get "Franken's book is from Fox". It's not too hard to imagine a non-US person not knowing who Franken is.
Bottom line is that Franken is using a wordmarked phrase and the images in the background are there to suggest a connection to the contents being about Fox. If he were a bit more intellectually honest (an impossibility, I'm sure), he would have the words FOX NEWS somewhere in the title instead of alluding to the connection in the manner he did/is.
All the ruling said was that the channel shouldn't be marketed as SpikeTv until the case was decided.
But the ruling also required Spike to put up an ungodly amount of money to be forked over as damages if Spike lost.
Hence, I believe they settled because they both had so much to lost. SpikeTV was supposed to go on the air in days, and so the channel wanted to market itself as SpikeTV ASAP, and Spike Lee stood to lose multi-millions if he lost his case.