From a privacy perspective, this feature is an abomination
The feature provides the ability to search through all of the previous things you've done and gain context in an instant, in a way that can be queried with natural language. I think we can agree what it aims to achieve is beneficial.
The implementation is what you're debating. I see these are two separate things, but they play hand in hand. If you get the implementation wrong, it can easily tank the feature.
Still, the documentation for this seems to disagree with what you're saying.
> This is a spyware that stores screenshots unencrypted
This page[1] states "Snapshots are encrypted by Device Encryption or BitLocker". They suggest that things aren't shared with Microsoft, though I totally understand the skepticism there.
[1] https://support.microsoft.com/en-us/windows/privacy-and-cont...
That sounds like it just means it's encrypted at rest - ie. while you're logged out - but transparently decrypted in much the same way as everything else on the system while you're logged in. That is to say, any running malware would have just as much access as it would do on a system that doesn't use encryption.
From a functional point of view, it can be treated as being equivalent to being unencrypted, with the exception being when you aren't logged in - at which point you're not running any programs anyway.
Except it's so thoroughly invasive and ripe for abuse that I can't imagine ever using something like this that isn't open source and thoroughly vetted. And I think your very valid points are stemming from that -- MS's implementation was hamfisted and halfassed, and people don't trust them even if they do it correctly. But those are issues with the implementation and the implementer, in my mind. Not the conceptual feature.
I think it’s more productive to discuss it in terms of the use cases and who they benefit.