You miss a major thing about the NSA: it's designed to hoover up foreign intelligence, and forbidden from doing so domestically. Putting EU data in EU silos makes it easier for the NSA legally: no one can object that they're stealing US citizens' data. An EU silo is totally, awesomely fair game for them to hijack.
Indeed! It's much more easier to bypass all those pesky FISC procedures. Up to now, NSA had to do some pretty heavy vetting to distinguish between US and non-US Persons; EU persons self-segregating themselves out of the pool of people stored in US data centers makes it much more easier for the NSA.
That's an excellent example of the law of unintended consequences.
Why not? The only thing that Google really does better than anyone else is search (and maybe free machine translation). For everything else, there's a better or at least equivalent option.
Gmail is actually doing quite a good job as well. What other mail provider does probably BCC every mail you receive and send to the NSA cloud for safekeeping and backup?
The first 90% of a project takes 90% of the time, the last 10% takes the other 90% of the time.