Wouldn't it be better if people were more tech-literate?
Coddling only works when those who are in charge of the tech play nice. But then breeds people who will more easily fall victim to the bad actors.
People who know about phishing get got by phishing attacks, too. How well has however many years of "cyber awareness training" gone?
The prior threat-model was, that e.g. a camera/gallery app which may/may not have a permission to a users current location, also has access to the history of a users' locations just by scanning the images when showing the camera roll.
It frankly makes sense to create a separate permission just for this location metadata AND strip this data when no permission was granted, I believe everything else would be MUCH harder to explain the user...
I'm sure I recall much older Android versions presenting all of the app's permissions at install-time. I'm very willing to bet that most users didn't actually read any of it. Overall, it seems like a very interesting problem to solve.
I think the 'ideal' thing to do would be an opt-in toggle for sharing "location and other extended info" for photos when selecting them, but I'm sure you can understand why a dev team took a shortcut to solve the immediate pain for most users most of the time.
To dismiss the banner you'd have to click a dismiss button which would ask you to confirm that you want to get rid of the location data completely. Then there would be a tiny little button that says “hide this location inside the photo, where I can't see it easily, but everyone totally could”. (But less stupid.)
It would be terrible because there would be huge support threads on why it's trying to share an image with an overlay, but it would get it across. Would be a different failure mode for user privacy than what you would have with a text prompt or an interstitial or whatever.
Now an app maybe just wants to set the image as wallpaper, send it to a printer or set as an avatar, so it requests to read it from storage. The OS injecting a watermark here or adding some UI would break decades of apps...