> a root level compromise on your system can see any of this stuff in plaintext as it gets shifted around.

Sure, but that was true without cloud storage, too. Worse: Without cloud storage, a root level compromise lets the attacker destroy your only copy.

However, this does not refute the argument that, with the cloud, the attacker can get at your data two places, instead of just one, thereby increasing the attack surface. (In fact, the attacker can get at it three places: in transit.)