However if I had to make a guess, they'll go server-side scanning only, and E2EE backups/Photos will never happen.
To me it's a pipe dream to believe they would offer E2EE, there's too much international pressure from governments around the world to keep iCloud backups open and going E2EE would trigger unpalatable retaliations.
They already do it for iMessage, and it makes it easier to turn down subpoenas if they can credibly claim that they can't even access the data themselves.
Likewise, offering an explicit choice also seems plausible. The full E2EE flow might have UX downsides (for example, the user might need to write down a recovery seed phrase on paper), so they might not force all users into that flow.
Most users opt-in to the convenience for iMessage making it, for all purposes, no longer E2EE.
I don't see them removing that precisely because of iMessage.
So you're right that the initial plan is indeed more privacy-friendly, but it has some major future privacy implications that are much worse.
Others providers do it and I don't expect Apple to sit and do nothing about it (governments, ngo pressure, etc.). Something worse is that the Apple brand could be labeled as a "CP enabler" which would very much hurt Apple way more than the current backslash.
They can expand client-side scanning massively or implement server-side scanning too. The latter will cause less objections, because 'Apple will not provide E2E' isn't a news item if they keep silent, while the client-side expansion will be.
The real answer is the same it's always been, we need to abandon the cloud in favor of going back to self-hosting and bring back the fully distributed internet, the problem is just getting technology to the point where doing so is easy enough for non-technical users.
For reference, from 2014: https://techcrunch.com/2014/08/06/why-the-gmail-scan-that-le...
If Google, Microsoft and Facebook are doing this for years then the question is why is Apple not doing it? Did they not think about the children until last month?