I like how you call yourself a grammar nazi, cite the old (and wrong) definition of a sentence as something with a subject and verb, but then say that "it is pancakes" is not a sentence. Why not? It's got a subject -- it -- and it's got a verb -- is.
Further, English has subject-verb agreement not subject-object agreement or verb-object agreement, hence "it is pancakes" is completely fine. Sure there maybe be some semantic anomalies, what with the singularity of the subject, the plurality of the object, and the copula which provides some sense of equivalence between them, but that's entirely a semantic issue and not a grammatical one.
Further further, setting off non-sentences by periods is common practice. You may not like it, but everyone else accepts it. You're just an idiot.
Further further further, "it's" is completely acceptable English, and isn't an official contraction only because there ARE no official contractions -- unlike French, with its (wholly impotent) French Academy, there is no authority on English, and thus no such thing as official English. The best we can do (as if we should care) is to reference the great authors of English literature (whoever they may be) and if you go by them, then you're most certainly wrong.
Further further further further, it's not your language, it's everyones, and I think the headline is fine; and they're not abusing it, they're using it in a completely standard fashion.