The privacy advantage is not giving extensions access to what domains you are browsing. The extension declares a static list but doesn't know what did/did not match.

Because if the extension knows what URLs you're accessing, and can send that data somewhere, that's a major privacy concern.

So this makes sense and seems good for privacy. But if it breaks uBlock Origin significantly, that seems like a very bad thing.

Ad sites know which urls I’m accessing, too. Google should prohibit those, too.

It’s a good theory, but it will still be possible to get an event for every single item that gets loaded. All they removed was the ability to block individual loads in that event. It is still entirely possible to collect that list of urls and snitch on the user.

They aren't removing the capability to monitor browsing.