But even hints of that type of behavior would be bad for business; Google is much more sensitive than e.g. Microsoft with Hotmail (sadly, it is easier to replace a search engine than Windows).
It is arguably good business for Google to not be evil.
Of course, it's even easier to read someone else's email if you own/run their mail server. But the bar is not that much higher if you're and ISP, a colo, or any of the probably dozens of hops your email goes through before it gets delivered.
If you really want privacy, you should use encryption. The even more paranoid should use encryption and mixmaster remailers. And the ultimately paranoid should use encryption, steganography, and some carefully chosen channels for transmission.
The "type of behaviour" I was speaking of are actual. Google do analyse your email, and they do remember your search requests. this is not outright spying like with Facebook, but this is close.
[1]: http://www.softwarefreedom.org/news/2010/feb/01/freedom-clou...
This is more about the many tiny dangers than about the few big ones, however. I don't really know all these dangers, and they add up. In the end, this tends to be a matter of principle: "If I'm not doing anything wrong, then you have nothing to see". I just feel safer that way.
OTOH... certainly, a web email account isn't that safe -- but are you better than Google's security people? I haven't been a sysadmin for over a decade.