That's the irony in this: This move arguably improves privacy by removing the requirement that images be decrypted on the server to run a check against the NCMEC database. While iCloud Photo Library is of course not E2E, in theory images should no longer have to be decrypted anywhere other than on the client under normal circumstances.
And yet – by moving the check to the client, something that was once a clear distinction has been blurred. I entirely understand (and share) the discomfort around what is essentially a surveillance technology now running on hardware I own rather than on a server I connect to, even if it's the exact same software doing the exact same thing.
Objectively, I see the advantage to Apple's client-side approach. Subjectively, I'm not so sure.