"I came in here expecting firm proof that the CIA was using Amazon to spy on my Prime subscription."

While that's no doubt already happening, it's also abundantly obvious that Amazon is one of very few organisations that anyone, CIA or not, would go to for consulting/professional-services when setting up a large-scale in-house "cloud computing" infrastructure.

There's not a large pool of companies with demonstrated experience, apart from Amazon there's maybe Google, Facebook, Microsoft, Rackspace - I wouldn't add Apple to that list (since their "cloud" track record is pretty poor), from there you end up with vendor-lockin from options like IBM, Dell, and perhaps to a lesser extent Cisco.

Out of all of those options, Amazon seem to easily be the "best choice" if I were to be setting up a decade-long partnership to deploy a multi-data-center scale private cloud.

See http://www.lockheedmartin.com/isgs/

Kidding aside, doesn't this seem like exactly the sort of move you would want your government agencies to make? Take advantage of free-market services where appropriate, and not get all "NIH"?

What do you mean by this? I did not get this reference.

So not exactly NIH unless your claiming that Tommy Flowers etal at the Post Office and Bletchly park invented this

Furthermore, while I'm acting mostly on assumption here, I doubt the agency is going to Amazon because they can't build and/or afford their own setup.

I can build and I can afford my own versions of a great many things. I still buy from vendors.

Anyway, AWS is heavily segregated. Simply having consumer instances is not going to enable them to snoop your traffic, and simply having consumer instances is not going to enable them to make Amazon give them your traffic if they couldn't make Amazon give it to them before.