Nice review!
So far I am not too concerned about privacy issues, mainly because I don't use my Gmail account for any "sensitive" e-mail transfers. I think Gmail is "good to have" for the reasons you just mentioned. A slick interface, a good search feature, and the 1 GB space make it very attractive.
Other people take the privacy issues more seriously: "Gmail is nearly immortal", "Google's policies do not apply", "A massive potential for abuse", "Inappropriate ad matching"...