For those suggesting a lawsuit, I'll put it out there again:
1) There is no SAE standard for EV power ratings (it is still under development) and Tesla never claimed that number was an SAE number.
2) Tesla claimed that number was "motor power" (which per their meaning is referring to what the motors can output on a motor dyno, given that they show both numbers now). Outside of the caveat about gearing that I mentioned, where the actual combined motor peak number may be lower than 691hp because of gearing differences, I find it unlikely that the motors can't handle the output claimed.
3) Tesla appears to be following electric motor industry standards in rating their motor(s).
I'm not a lawyer, but I presume that "motor power" terminology there was added with input from lawyers and that Tesla's lawyers are probably well aware there is no standard yet for rating EV power. And that allows them to say they have not made a factually false statement. It then becomes a case of how misleading that statement is. Any plantiff trying to sue Tesla on false advertising would have to demonstrate that a significant portion of customers was misled in regards to this (not simply themselves or the judge/jury).
I do agree with wk057 that there is no advantage to Tesla for offering a free upgrade, given that is essentially admitting fault. Keep in mind even if they do so, they can still be sued for false advertising (esp. if as people speculate that the Ludicrous upgrade doesn't give 691hp either).
Overall, while I think the current motor HP advertising is stupid and misleading to people who don't know better, it's at least probably correct and there wouldn't be much for people to get at on it currently.
However, when the CEO says "in the P85D we've retained the larger motor with the smaller motor in the front which basically gives the car half a gain as much power" (which would be > 600 HP based on the P85 specs), and Tesla themselves combines the HP number on the site to show 691 HP as was the case for early buyers, that definitely implies that the car can output that combined power. Them removing that number, in my opinion, is already at least a partial admission on their part that this was at the very least misleading, but worse so was false entirely.
Edit: (Hit submit before I was done)
I think your points 1+2 don't really matter, honestly. Horsepower is itself well defined: a unit of power equal to 550 foot-pounds per second (745.7 watts). We don't need SAE here. As for the whole "motor power" thing, name another car company that does this. I'm buying a car, not an electric motor, so I want specs on the car when I buy a car.
For your point #3, if I buy an electric motor that is rated at X HP, I will be able to utilize it at X HP. I can not with the Model S that has this rating.
Again, the Model S is the product I'm buying, not an electric motor. So many of these points are moot.