Yes on both accounts.
I get what you're saying, but "privacy" in your context has a big asterisk next to it - because Apple is building a way through that privacy... while giving you more... privacy.
If you were to put privacy expectations on a scale of 1 to 5, 1 being no expectations and 5 being full expectation, I would put iCloud photos and backups at 3, and what's on my phone at 5 (or more...). And that is completely acceptable to me because iCloud is on their servers.
What Apple is doing bumps up (potentially - we're all guessing that's Apple's end goal here) iCloud to a 4, and bumps down our phones to a 4, because there's now a "loophole" (again, sorry for the lack of a better word) through that privacy on our phones... as will there also be a "loophole" on iCloud even if they implement E2EE on it. Nobody will be able to expect a 5 on any of Apple's products (cloud or local) any more.
I would prefer a 5 on my phone and 3 on iCloud. The phone is mine, iCloud is theirs. I'm renting iCloud space, I own my phone. And I would prefer to keep my phone at a 5 while also being able to use iCloud at my discretion, with the full understanding that iCloud is at a 3...