So does this mean all my photos currently in photo stream will be gone? Essentially starting all over again in iOS 8 right? Or am I missing something?
Not PhotoStream, iCloud Photos... they are two very different things...
Photostream is your last 1000 photos and doesn't count against your iCloud storage allowance and is also not accessible beyond allowing you to sync photos across devices.
iCloud Photos is the new Yosemite / iOS 8 "upload all your photos to iCloud to backup/share them" functionality and does count against your storage allowance along with the new iCloud Drive general storage functionality.
It is the new iCloud Photos / Drive that are being wiped which are both beta features.