1) Microsoft called it unlimited storage. And as far as I know they did not put limits on what it could be used for.
2) I don't know that it was a small number taking advantage of their terms to store videos, backups etc, I haven't seen any numbers attached to the claims. It may have been a significant number.
3) I don't trust ANY of the cloud suppliers to not look at what is stored there, and that includes Apple. Apple says the right things about privacy but 2 days, 2 months, or 2 years from now things could change. And saying you respect privacy doesn't mean that is what you are really doing. That said, I trust Apple more than any of the other Cloud storage companies. AND that said, I don't use any of them.