Then it urns out that Ms. McCluskey wants to brand more than just a local charity fund raiser-- it now appears as if she has also franchised the name "McFest" to other groups in other states, and may be seen as intent on building a business around the name-- the "McFest" record label being but one example.
Well, yes, that's usually why people seek trademarks. To build a business. Shouldn't be any surprise there.

Finally, you raise the quite reasonable issue of "fraudulent purposes". According to most published sources Ms. McCluskey raised $30,000 for charity. Of that money, we are told, she has spent $5,000 (or nearly 20%) on her trademark filing and appeal. Raising money for a specific charity, and then spending it on something else -- if that is what she has done -- at the very least calls into question her judgement, and that of her legal advisors. Is it fraud? Well, when you tell someone that the money they are giving you is for a specific charitable purpose, and then you spend it on something else, you are guilty of a deceptive practice, if nothing else.
The "fraudulent purpose" term I invoked was meant specifically for the name itself; i.e. using the name to trick people into thinking McDonald's was somehow involved. It is clear that this is not her purpose.

As for where the money is going, I don't see that this has anything to do with what name she chose (or anything to do with McDonald's objection). But since you brought it up, it is perfectly normal and acceptable for charities to use part of their donations for covering overhead costs, improving their business assets, and increasing their operations. It would be impossible for them to grow as an organization if they didn't. If she is using part of the organization's income to expand the business through a trademark, that is obviously a business decision she thinks is worthwhile for the long-term success of her charity. This does not equal "fraud" in any way. If you care to check the norms for other charities, it looks like this is perfectly reasonable.

For those who don't care to click the link, it seems that the vast majority of charities (70% to 90%) spend between 65% and 75% of their income on their actual charitable programs, meaning they spend 25% to 35% on management/overhead/etc. In fact, it's not considered irresponsible unless they're spending more than 66% of their income on business costs and management, leaving only 33% to the charitable programs. If she's only at 16.6% of her overall income with this battle, that's hardly "fraudulent" or even questionable when compared to other charities. Of course, I don't know what her total overhead/management/expansion costs are in relation to the total income, and apparently neither do you.

Maybe you should get all the facts before implying fraud and deception?