The legal requirement is to be in proper control, there is no explicit "at least one hand" law or rule. You could infer that no hands would constitute not being in proper control of the car, but even things like eating with one hand on the wheel have been seen as improper control. So while it's slightly pedantic, "not in proper control" covers more than how many hands you have holding the wheel. Equally if the car was steering then if you could demonstrate you were willing and able to take over instantly then there's no legal obstacle to not having your hands on the wheel, just like there is no requirement to have your feet on or near the accelerator or brake when on cruise. I'm not saying that would be an easy point to argue, but there are already limited level 3 applications and highway cruise control scenarios below certain speeds where no hands are required. Again Mercedes is the forerunner in this. BMW and Cadillac also have versions of this.
Cameras have also been in cars for years for passive safety reasons, Mercedes use an internal camera for their attention assist (I think its been around for 14 years), as it's not just when using autopilot do drivers lose concentration.
I think the issue is sending some of the footage back and what they do with it. You can understand if given Tesla's usual desire to use AI for everything and to do that you need video footage to match against consequences. So passive safety, driver alertness, trying to capture data to improve the whole nag system, who knows, I imagine situations like the case where 2 people were reported to be in the back of the car when it crashed on autopilot might be more easily explained, including how they defeated the nags if you have a video stream of the event.
Blocking the camera may end up rendering various capabilities inoperable but personally I don't see it as a threat in the event of an accident if you're driving half decently, if anything it might be an aid. But each to their own, GDPR etc were all introduced to ensure we give consent first rather than it be presumed and that's how it should be.