Personally, I believe that the maximum privacy possible is about 80% - you can completely secure your machine, but as long as it's connected to the Internet there's at least SOME data that's tracked. Good to know that someone shares my viewpoint, though. Windows isn't designed with privacy in mind - it's designed with functionality and money.
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...