Amazing how dramatically they've had to rework Buzz in just a few days. Google will think twice about rolling anything out to millions of people at once from now on.
I actually think their approach was pretty good. You can't usually guess what users want. The guys at Google probably thought, "yah people will really like it to automatically link without any work". It's tough to gauge what the users want until you put it in front of them. It may hurt sometimes at the beginning, but if it leads to a better product in the long run then I would say: keep it up.
No. It is unethical to risk user privacy and data just to benefit the company.