Praise be to Allah.
The action which you describe is an innovation (bid’ah), as you indicated in your question, because there is no doubt that the people who are doing this are doing it as an act of worship by which they seek to draw closer to Allaah, and every action which is done as an act of worship must have evidence from the Qur’aan or Sunnah to show that it is prescribed, otherwise it is an innovation.
With regard to those who ask, how can reciting Soorat al-Faatihah be wrong?
It should be noted that innovations in religion are of two types:
1 – New innovations which have no basis in sharee’ah, such as those who invent a new prayer in a manner that has not been narrated in sharee’ah. This is an innovation for which Allaah threatens the one who does it with Hell.
2 – Innovations where something new is added to an action that has a basis in sharee’ah. For example, there are adhkaar (dhikr) which are prescribed following the prescribed prayers, which are well known, and no Muslim disagrees with this. But if a group of people comes along and says that so long as dhikr is prescribed following the prayer then we will remember Allaah together and recite dhikr in unison, this is bid’ah. We say to them, either you think that this way of reciting dhikr is better than the way of the Messenger (peace and blessings of Allaah be upon him), and therefore that you are following a way that is more guided and better than his (peace and blessings of Allaah be upon him) – which no Muslim would say who testifies that Muhammad is the Messenger of Allaah – or this is wrong and is an innovation, so they should give it up.
Hence it is clear that regarding this matter as bid’ah does not mean at all that reciting al-Faatihah is wrong, rather what is wrong is reciting it in the manner mentioned in the question. We do not love the Sahaabah any more than those who came after them (the Taabi’een), and the Sahaabah were the people who had the greatest love for Allaah and His Messenger (peace and blessings of Allaah be upon him), and it is not narrated that they did that for their Prophet (peace and blessings of Allaah be upon him) when he died. All goodness is to be found in following them and their way, and all evil is to be found in going against them and shunning their way. Moreover, the fact that these people single out ‘Ali and do this on the occasion of his death implies that they are exaggerating about him. This may be one of the blameworthy innovations of Shi’ism, which is to be avoided altogether.
May Allaah make us and you steadfast in adhering to the Sunnah and avoiding bid’ah. Ameen.