Like most of Microsoft's more odious features, this one can be turned off through GPO/Intune policy across an organization. As such, the liability will mostly fall on the organization to make sure it's off. The privacy and security impacts will be felt by individuals and small businesses.
They claim that the data is only stored locally, so far. We'll see, I guess.
I think you're massively overestimating what normal users are willing to do. Normal users aren't going to install Linux because normal users don't install operating systems. Other things normal users don't do:
When the upgrade from windows 7 to 10 resulted in broken systems/applications, some normal users paid someone to fix it, but most bought a new computer.
In short, Linux is ready to replace Windows, but only in the cases where it's sold preinstalled on supported hardware. Android, ChromeOS and Steamdecks are good examples of this.