If I run a query that tells me X hundred thousand users have used feature Y, have I violated anyone's privacy in your opinion?If you haven't asked them to specifically opt-in to data collection, then yes. And Microsoft does not ask for permission. There are some programs that do a very good job of asking before they send any crash or problem reports. Microsoft is not one of those companies.
non personally identifiable user information
No such animal.
at the expense of quality and stability of product?
One does not necessarily cause the other.
I'm not in the software field, so I'm sure your experience and mine are different. But I work for a multi-billion dollar healthcare company, and the legal department won't let us touch any sort of telemetry with a ten-foot pole. Somehow we're doing just fine, and have a huge satisfaction rate with our user interfaces, according to the studies that have been done for us.