It was sold as a nanny cam which is really a legitimate, if slightly distasteful, function. There is an image of it shown with towels on the hook, but it isn't stated or implied that it should be used to spy on people as they use the bathroom.
I'm a big fan of holding tech companies to the same standards as other industries, but not a big fan of holding them to unreasonably high standards.
If they are a legitimate product, how do we tell the legitimate product from this (in your words) "crappy attempt at covering the seller's ass?"
If they are a legitimate product and we can't reasonably tell the difference, why should Amazon have banned this product?
And even a towel bar or clothes hanger does not automatically mean bedroom or bathroom either.
Closets and towel bars can and do exist anywhere, like kitchens, laundry rooms, front and rear entrances, mud rooms, workshops, offices, stock rooms, really anywhere.
They are even legitimate IN bedrooms, if it's your own bedroom. It's wrong obviously to peeping-tom on a guest or tenant, but if I want to monitor my own bedroom when I'm not in it, I certainly can, and that means the product can't be automatically invalid to exist.