Only those pictures which were about to be uploaded iCloud, would have been scanned, and Apple would get information about image contents only if it is flagged. The phone is blackbox and it scans your files anyway all the time, sending metadata to Apple e.g. because of the spotlight feature and photo albums, or simply syncing your data to cloud. There is massive AI behind that spotlight feature. Nothing would have changed, just the different kind of information would have been flagged, but this time encrypted.
The major improvement was E2EE like system for Photos. Currently they are not E2E encrypted in Cloud. They are plaintext for Apple. iOS 15 beta had also encryption for backups, but it never reached public reach after CSAM was delayed. So we lost yet another feature which would have increased the privacy. "But it happens in my device", is not really valid argument since most people don't understand what happens in their devices in the first hand. Even AV engines sends all your data to cloud, and you can't opt out in most of the cases and it is for every file.