CSAM scanning is probably the easiest thing they could do to satisfy this demand, and if you don't use iCloud Photos, you're not affected by it at all.

As far as encrypted backups go, it's an open question whether they want to deal with the legal and support headaches that such a change would bring. If they continued to do nothing, Congress might force their hand by legislatively outlawing stronger encryption - they had to shit or get off the pot.

For users, if you enable this feature, but then lose your password, you are entirely screwed and Apple can't help you. Encrypting "In-transit" as a middle ground is likely good enough for most people, until researchers manage to come up with a better solution.