Is there anything wrong with faculty socializing with grad students?
I suppose it depends on whether one views grad students as hoi polloi who need to be kept on the other side of a "class boundary" (as the CHE comment put it), or whether one views them as colleagues who just happen to not be as far along on their academic journeys.  I prefer to see them as colleagues.

For what it's worth, when I was a grad student my advisor often had us (his research group) over to his house for dinners and drinks, and I'd often play racquetball with one of my dissertation committee members.  This made us feel appreciated and made it much more palatable to put in crazy hours when needed to meet a proposal or paper submission deadline.  And now, as a tenured faculty member, I take my students out to lunches and dinners and beers and hiking trips (alas, I'm too old for racquetball now).  I enjoy getting to know my students as whole individuals, and find that the socialization engenders a sense of community that makes things more pleasant for everyone.

Socializing with students is very different from being "buddies" with them: the relationship between a professor and an advisee is very different than that between friends.  But IMHO this is no different than any other professional relationship with any other colleague: there are some things that are fine to share and others that are best left unexplored.