Yup, the problem that average people (so average privacy concerned - like "I don't like that Facebook knows where I'm going Tuesday night but don't care that much, that I would make a change in my habits") - won't change their daily, weekly, monthly habits/life in general because of this. It's too comfortable that somebody would give up known comfort for something like "privacy" (which meaning is mostly unknown for him/her). Of course, a complete isolation of a workstation from any form of network is technically the "best" solution for privacy and security. Just, how many of Internet folks would give Internet completely up? It's a too drastic change in an average privacy concerned person life, that it would really make (short or long term) effect. We just have no real option - leave the censored, manipulated, monitored "Internet" behind and go for a run (BTW, it's also healthy), meet friends (or somebody else) in real life OR accept the mountains of ToS-es and don't comply.
Until there's surveillance in the streets that is.
True. But real-life surveillance much more expensive than controlling Internet backbones, upstream, etc. Although the government has anyway de facto unlimited resources, so in a way, it doesn't really matter out of the privacy aspect - you're just more social with people around you (or maybe not), which can be better than chatting them but seeing them daily.
There's also the issue that people can't stop existing - they can't avoid street surveillance. But then again - people generally accept Skype, e-mail and Facebook as social contact so that may also be hard to give up to some people...