I realize this is a simplification of the actual method Apple has implemented and as it currently stands it would only scan photos that are destined to be uploaded to the cloud. If it were guaranteed that would never change then I think a lot more people wouldn't have a problem with it. But it will be abused. Every[1] single[2] time[3] this sort of system is implemented "for the children" it gets abused. The slippery slope here is real and well-demonstrated in various countries around the world.
For my part I have come across an imperfect analogy that I feel accurately captures how I feel about Apple's solution. My phone is like my diary. There's nothing illegal in there. But there is stuff that is deeply personal, private, and even some that would be terribly embarrassing if the wrong person saw it. As long as I keep my diary to myself and don't let anyone see it I have nothing to worry about. If I were to send my diary off to someone else known to read diaries then it's my own fault as much as anything else if it gets read and intimate details of my life known.
[1] https://en.wikipedia.org/wiki/Internet_censorship_in_the_Uni...
[2] https://en.wikipedia.org/wiki/Internet_censorship_in_Austral...
[3] https://en.wikipedia.org/wiki/Internet_censorship_in_Russia