I had the same problem with my late 2007 MBP, with two batteries to be exact, now i'm having a "replacement battery" (not Apple original) and to be honest it works better the the original ones.
I had the same issue (image attached) and was told by the Genius bar that it was 'normal operation', but they could give me a new battery for only $100!
Mine did the same exact thing. I have been through 2 Apple batteries, both have expanded like that. I ordered a FastMac Battery which has been working great.
I have batteries bulged out on me in one of my APC rack UPS.
I couldn't pull the damn things out to replace it - and had to disassemble the UPS to get to it.
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