A free society is one where people are free to question social norms, express themselves, and act in ways that don't violate others' rights. A society with ubiquitous surveillance is no longer a free society because people cannot freely and openly question social norms through action, express themselves, or act in ways that may be annoying or unbecoming but which do not violate others' rights. In a surveillance society, even one where "everyone knows", these behaviors are implicitly and globally discouraged by the act of recording all behavior and saving it in perpetuity.
I recommend reading about chilling effects < http://en.wikipedia.org/wiki/Chilling_effect >.
If you read the wikipedia article, you will find that chilling effects are not only the result of vague laws and inconsistent enforcement but also the result of any legalistic behavior that might cause others to self-police or self-censor.
As for your assertions about universal surveillance, I find your position has a number of serious conditions:
1. It requires total surveillance of everyone.
2. It requires totally unambiguous laws and norms.
3. It requires total stasis of society.
4. It requires total faith in system by the governed population.
There are two major issues with this position:
1. Society must transition to this system somehow and survive.
2. People and systems in the material world are imperfect and we have no existence proof of any social system which achieves anywhere near the requisite levels of assurance.
I can only see this kind of system working in a society with 0 or 1 people in it. That is to say, I believe what you propose is impossible to enact by its very fundaments.
However, you continue to argue that attempting to create such a system is desirable. Due to this, I can only fathom that either:
1. You are a naive totalitarian.
2. You are a long-playing troll.
Because of this line of reasoning, I must conclude that the attempt to bring your proposed social system into being will not succeed and that the intermediate state will be much worse than the present state as totality will never be reached but concentration of power will corrupt.
If you insist that your proposed system is possible, how will you deal with dissenters such as myself who will refuse to live inside such a system? Doesn't the existence of dissent mean that you cannot reach totality? Or perhaps you believe that such a system can be made to accommodate dissent? What if the resistance is violent? Should the surveillance state kill anyone trying to resist its total surveillance, total laws, total stasis, and total faith? That would surely solve the dissent problem but perhaps the result would be neither stable nor pleasant...
In the real world, there is lots of asymmetry. This asymmetry is absolutely critical when making ethical considerations.
Obviously it will take some time. Even if we recorded everything everyone ever did starting 50 years from now, which is still quite a stretch, it would likely take another 150 before we could be certain that every living person had been under surveillance for their entire lives.