They wrote: > inside the famed Livraria Lello bookshop

So I think they are aware of the “false friends” words.

With that said, I don’t think it’s an actual library, more like, as you said, an art installation, an exhibition, a space for highlighting books.

I wish there were some photos of it in the article so we could get a better understanding of what it is.

I've been to lots of bookstores with sections or displays for famously banned books. I'm pretty sure my local Indigo (basically a Canadian Barnes & Noble) has one. If that's all this is then it doesn't sound especially newsworthy outside of the celebrity involvement and maybe the renown of this particular shop.

OTOH the article describes it as a "permanent" installation, which does sound a little different from what I'm picturing.