Google's name is too tarnished with regards to privacy and will never be able to launch a social media site again.
I don't know if it was really a privacy issue. After all, FaceBook is probably the only site more devoted to mining your data than Google is.
No privacy issues. If I don't want my plus profile to have pictures, I just never download a picture app.
I find your idea appealing in general, and would love to see a social network that worked like that, I'm not sure how it could work. Doesn't that mean that the pictures app developer would have their own privacy settings (and maybe "backup" pictures on a server they control)? And wouldn't app interoperabiility would probably make your privacy "the weakest in the chain"/"the weakest installed"? Also, doesn't that make it where every single feature needs to hit critical mass independently... after all, how do I see your pictures if I need to install an app to do so? What about dueling options fragmenting the market?