Yes but the criteria for a warrant can be nothing more than reasonable suspicion. So a warrant could be issued for access to someone’s entire device regardless of whether objectionable content exists on it or not. Theoretically, a government could issue a warrant for every single person’s phone and get what they want. This prevents anything even close to that from happening because users aren’t required to provide the keys and Apple won’t have them unless that content matches what’s on the list.

On your second point, yes… that’s a very real possibility and one that I’m sure Apple has already considered and has responded to.