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I'll address this all at once.
If Microsoft is even suspected of using data as blackmail or identity theft, they will be completely destroyed as a company. They have reasons both legally and related to revenue to keep whatever data you have under tight lock, and as a huge corporation, news spreads fast. The idea that one of the world's most well-known and government-monitored computer company would use your data like an internet criminal is, well, pretty tinfoil-y. There is no reason for concern that either Microsoft will use your browser history to blackmail you, nor that any old hacker would be able to get it. And if there is a breach of security, I'd bet everything that Microsoft would be on it immediately, because risking punishment by law and money would be disastrous.
Also, when it comes to the mandatory disclosure thing, they don't even use it until legal requirement or fraud protection. So they don't gather your data whenever you use it, they only include that because they want to keep in good terms with obnoxious government spy agencies. The way you've posted it seems like they just take everything you type at a whim. But they only do solely when a government agency would require them to do it in the first place.
I too would not like police cameras in my home. I don't feel like giving up all my security for a bit of safety. However, police cameras are looked through by police. 100% of data collected through 10's system is only looked at by bots, and used to make systems more intelligent. At worst, your performance data may be stuck into a formula judging performance in a certain way, and that 0.0001% in a programmer's memo might be yours. But there are no humans looking at anything I do. The only time remotely possible is if a government agency or legal suit forces them to get information anyway, in which I highly doubt our research would be used against us. They probably won't even use most of the data in the first place; Google would be a much better provider. As far as I know, it'd just be browsed by more bots to find suspicious transactions or meetings nearby suspected fraud sites, which would then be compiled into a big thing for a jury to look at.
I guess this is, in the end, a matter of preference. In summary, the chance a human sees a single byte of data even slightly related to us is statistically impossible. If you are really uncomfortable that a human would have a 1/someabsurdnumbereth of a chance to see an email about suspicious transactions that they would probably get from Google anyway, or that your computer's performance might change a percentage in a programmer's feedback data, then 10 is not for you. Trust me, our dragon research is safe.
This might be a dumb question, but, will I lose files if upgrading from 8.1
If the automatic way is done, no. Not sure about the manual OS upgrade though.
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