> That makes privacy worse than the default setup with Tor since there's no stream isolation. With the standard Tor Browser you get a different circuit for each first-party domain, that's not something you'd have with this.
You can try it for yourself, open a tab in the Tor Browser with foo1.com, look at the circuit in the Torbutton. Then open another tab with foo2.com, look at the circuit and compare it with the earlier one.
There is safety in numbers accessing the CloudFlare service. It helps reduce traffic analysis attacks that could otherwise occur on exit nodes and the exit node's possible-non-authoritative resolver. Because correlation between the circuit to CloudFlare's resolution and the exit node's site access is a bit harder. Granted once you enter the HTTP world and ask that second level domain to start the TLS handshake, they can see where you're going anyways so it might not matter. But it can prevent you from being poisoned by the exit node's DNS resolver. It just removes one layer of trust away from the exit node.
On the other hand, I'm sure this is fixable in certain ways, just needs patches in the browser/proxy.