Less divisibility than a satoshi doesn't exist in the protocol so if someone says millibit they must mean 0.001 BTC, regardless of if people are using bits as nomenclature for uBTC. This is why the argument that there will be confusion between the two makes no sense.
A single nanobitcoin cannot be handled by the protocol (yet) but it certainly exists as a concept. Amounts smaller than a satoshi can be handled by exchanges and third-party payment systems.
A tenth of a US cent (also known as a
mill) certainly exists as a concept. I do believe that various gas stations in the US quote prices accurate to tenths of a cent.