The creator and admins of the room picks the encryption preferences, iiuc: if you have a client that doesn’t support E2EE, you might be able to create an encrypted room (?) but it would be pretty useless. The clients all clearly mark the encryption status of the room you’re in.

So if an ignorant/malicious user creates a room without E2EE and doesn't care to enable it even when requested, all users are forced to converse in effectively plaintext, and the solution is "clients tell users it's not E2EE".

IMO it should be the case that it's always E2EE, no other options. Until that's the case I think Matrix ecosystem isn't keeping up with centralized solutions like Signal.

E2EE is really annoying, in lots of ways: if the users in the room want encryption, I’d rather they just create a new room.