The "I have nothing to hide" line frustrates me too.
The twitter-friendly response is, "Just because I have nothing to hide, it doesn't mean I'm happy with a webcam on my toilet."
The longer response is that the NSA is asking Google to record all of my searches, Comcast to record every website I visit at home, Verizon to record every place my cell phone goes and every cell phone call I make, and Voipo (my home phone service, similar to Vonage) to record the phone number on every home call I make. Even if I was comfortable with the government possessing that information without probable cause, it means a crooked law enforcement official, a disgruntled employee, or a criminal hacker can get a scary amount of private data about me from any one of those five sources and use it to stalk me or commit identity theft. If I am the only person with all of that data then the stalkers, the identity thieves, and the government have to hack my personal machines to get it.