Is the LCD broken

I should add the Moiré pattern you see also points to pressure from the lid forcing the LCD panel to push forward causing the LCD crystals to deform giving you the rainbow coloring effect (bent lid). In addition to the damaged LCD which is where you see the colored lines and deformed image.

Best to replace the full lid assembly here.

It is not bending

You should still be able to see the moiré pattern when the system is turned off using a flashlight aimed at the front of the screen. The amount of pressure still pressing on the screen from behind doesn't need to be that great here.

From the picture it looks like the LCD should have no issues fitting in. There have only ever been 2 where I couldn't fit an LCD in (1 run over, lid completely curved, another huge dent in the back, pushing the LCD outwards). These can even be a little bit curved, and the LCD can still fit in fine.

Usually when these crack the LCD can look a bit curved in the light, but this is just from the damage to the LCD, not the lid being bent. If you shut the lid and check around the sides, and there is an even gap between the top and bottom half of the Macbook, it will just need the LCD.

@reecee - What? The image is of the damaged screen not a new one.

As to the damage its self clearly something heavy (bang) was placed on the lid causing it to buckle snapping the tab connections (the cause of the vertical colored lines and the other linear distortions). The moiré pattern points to the location of the compression point (middle 1/3 up from the bottom) and what is still being pressed from the back side.