In my opinion, there is a larger issue here than what appears in the TOS. The issue also relates to Picasa, Flickr, Kodak Gallery, or whatever the gallery of the week is.
The way most people treat digital photos, it is no better than the old days of having hard copies of photos floating around unorganized in shoe boxes.
I don't want some 3rd party "owning" my stuff. Even if they don't legally own it, they actually do in practice. What happens if you spend years building your web galleries on Flickr and they decided to go out of business, sell out, start charging, etc. You've spent hundreds of hours organizing your collection, adding comments, etc. And now you have nothing.
Plus, I know many peeps who take as many digital photos as I do but they couldn't show me a comprehensive collection of there digital photos if they tried. Some got uploaded to Shutterfly, some to this place, some to that place. Some online services won't even let you get at the original, full sized image you originally uploaded (presumably sometimes they don't save it and other times have reasons for not wanting to let you see it again.)
Personally, I take a two staged approach. The first stage is batch renaming all my photos based on the Exif data, losslessly rotating the ones that need it (also in batch) and organzing them on the file system into a directory structure based on year and then event. This all gets backed up via time machine and once a year I cut a set of DVDs and give it to a family member to keep in a safe place.
Second, I add the photos to albums organized by year inside of a shareware image publishing package that I developed. I have all the HTML content locally and it also gets published to my web site. But ultimately I own everything. One could use iPhoto here also, since even if iPhoto goes bust some day at least you have the content locally and could parse the XML files if you needed to get the user content into a different format.
Maybe I'm anal, but I'm sure my kids, their kids, and so forth will appreciate having the memories stored in a usable way. If the JPEG format ever looks to be going south, I can will run a batch job against all my photos and convert them into whatever the great new format is.