and sure, phones have a huge attack surface in general, but changing defaults in this way makes certain attack scenarios easier, even if it also happens to be convenient for other users.
i think we agree that encrypting data at rest isn't sufficient for keeping private data private, but it may be necessary and is probably beneficial.
for some users, keeping keys in microsoft's cloud may be a good option, but i think that hinges on whether they know and understand the implications of sending their recovery keys to microsoft.
for example, maybe you lose your phone and some pickpocket doesn't grab your data very easily, but maybe the local police force gets your recovery key from microsoft and finds nude photos of your significant other before returning your phone to you. i'd be pretty displeased in that case, even if it helped me get my device back.
i suspect many people storing recovery keys with microsoft don't know that this is happening, and might have made different choices if they knew that and understood some of the implications.