To be honest, having different terms and conditions for every service that Google runs must have been quite confusing for a lot of people*, so consolidating them into one package does make sense.
I do not think so. I rather think that is quite confusing to see that Google uses my Gmail login and data to "improve" my search results or stores my search strings persistently. I did not sign up for this feature.
It makes a lot of sense to have different T&C for a serach engine, an email service, a video sharing board, and a social network.
I can however understand the problem with Google now being able to use data collected from one service and now using it in another, but if all they're doing is using it to target us with more specific ads then I don't really care.
The question is not whether you care. The question is whether it is legal to join those databases without explicit user consent. And there is a high probability that this is ruled to be illegal in Europe. And it would be a huge win for the user's ability to control the use of his personal information.