I think it's a better outcome if it leads to iCloud encryption.
A reasonable person could think it's better to just have iCloud remain unencrypted and keep that separation strict in a more pure kind of sense (scan of unencrypted photos on server vs. hash threshold test on upload), but I think that person would have to acknowledge that the policy as described (only being enabled with iCloud photos enabled) is not worse (and if it enabled iCloud encryption is better on net for privacy) than the default in terms of what is specifically happening. It's more of an ideological argument about separation of server/device than what the specific implementation was.