Yes, exactly.

Any webmail service that stores email unencrypted on its servers is subject to subpoena / FISA requests, and there isn't much they can do about it.

They could roll out client-side encryption -- but there's little business incentive for them to do so on free accounts. That said, as an option for paying apps users, it would be quite valuable.

Automatic scanning of emails isn't ethically suspect in my opinion.

My reasons for not working at google right now are: lack of desire to engage in big company politics, the apparent softening of the 20% time policy, regular-corporate/long hours, and the commute I'd have to take. Otherwise it'd be near top of my list should I go back into full time business.