Indeed, Vista Home Basic doesn't include the Aero graphical user interface as well as Windows Media Center, scheduled backups, and other features present in Vista Home Premium, Vista Business, and Vista Ultimate. To drive the point home, the lawsuit (which is linked in PDF format from the Seattle PI article) quotes a PC Magazine column that claims that Vista Home Basic could be "the most pointless edition of Windows that Microsoft has ever released."
When asked about the lawsuit, a Microsoft associate general counsel told the Seattle PI, "We feel as a company we went beyond what we've ever done to try to educate people so that they understood and could make the right purchase decision." The associate counsel pointed to the "Vista Premium Ready" designation, which is different from the "Vista Capable" one. Nonetheless, the plaintiff is seeking class certification for the lawsuit as well as unspecified damages from Microsoft.