The Body Shop's animal testing policy is based on a rolling five year rule - that they will not use a raw material tested on animals in the previous five years. Five years is pretty arbitrary (especially considering that a new formulation with a novel ingredient may have a 2 or 3 year development period anyway), and why does it have to be a rolling period? They are basically getting for free research data developed by larger companies, including L'Oreal. These large companies voluntarily put their animal data into the public domain in order to reduce animal testing.
Their finished products are not tested on animals, but then, nor are anyone else's.
The issue with marketing behind an anti-animal testing banner is that it implies your competitors are unethical. It also begs the question of how much safety testing do your products undergo, and is your attitude to safety in general lacksadaisical? What kind of safety testing have they done on their weird and wonderful ingredients brought back from Anita Roddicks trips to the rainforest?
If L'Oreal do continue with the Body Shop brand image, one thing that should improve is the quality of Body Shop products. By adopting L'Oreal's quality standards and benefitting from their raw material purchasing power, Body Shop products will be able to use purer raw materials with no base odours. Also, if L'Oreal decide they want to advertise Body Shop products on TV, then the products will have to do what they claim to do.
As to why L'Oreal bought Body Shop - there could be various reasons. They may have bought the brand in order to kill it, or they may have done it for the shops. It was a pretty inexpensive purchase for them and they had too much cash on their hands which needed to go somewhere. I doubt they would have bought it for the expertise, as they would not have really recognised much.