Windows telemetry is encrypted, which as you can imagine, makes it hard to analyze.

OK. Let's assume nobody has ever gone through it. Do you imagine that - especially in the US - lawyers of massive companies didn't wring out anything and everything about telemetry?

Do you imagine companies like JP Morgan, or - famous for money laundering terrorist money - HSBC would be happily using operating systems with "spyware"?

I don’t know exactly what that’s referring to, but maybe it’s the fact that some (not all) of the bullet points in this telemetry doc are super high level, leaving much to the imagination: https://learn.microsoft.com/en-us/windows/privacy/optional-diagnostic-data

The one you linked is the Optional Diagnostics Data, this is the one you can disable by toggling telemetry to "basic".

Also, even if every last bit of telemetry was completely documented, that doesn’t make it cool to send all that information to a company known for abusing user data.

So every "power user" disables it, and then complains when Microsoft kills a power-user feature because their data showed that nobody was using it. :D

Again, without source code, you’re taking Microsoft’s word about all of this

I mean... You can easily tell if the data is being sent out (massive increase in outbound connections) or if it's encrypted (... can't read it without decrypting).

An earlier version leaked the user’s private information to other processes on the machine and failed to filter out sensitive user data.

Correct. An early test version had bugs. Colour me shocked.

Either they don’t care about user privacy—or they do care and they’re just incompetent

Or... the whole thing was about an early test version and everybody blew this massively out of proportion...

Yup.

So you know that the only problem and the reason for the lawsuit was that they were collecting the data in the wrong order (should've started with parent consent) and then kept it for too long? Not that they were endangering the children's data, or gathering too much of it? As in: if they asked for parent's consent first, THEN gathered the data they gathered, there would be no lawsuit?