This also has the advantage that the hash of the entered password never travels over the wire (if your db server is on a different box)
Umm... and the actual correct password hash traveling over the wire as a result is better how?
3) You have to store encrypted data individually for each user. Most user won't fill their GDrive with their own unique data, most data will already be uploaded by someone else. This means the service can, if the checksum already exists on the server, skip both the upload and the storage of the file, it'll just add a reference to the existing one.
Money saved right there, and won't work with individually encrypted data. (and yes, it can be "abused", a hacked client could add a reference to a file you don't actually have - yet - if you know the checksum, so perfect for distribution of your "photo collection")
Stellar rays prove fibbing never pays. Embezzlement is another matter.