From a common-sense perspective, Pete, I'd say that if the image was taken in a private place, shows an identifiable person, and that person does not give permission for us to be using their likeness, it should be a no-brainer that we don't have the right (ethically, at least, in light of the board resolution) to continue using their photo in defiance of that. So a "good outcome" to my mind would have been asking the person to verify that they are who they say they are, and if that checks out, deleting the image. "In scope", which is the content of the actual close there, is pretty much a non-sequitur (and is yet another example of why Commons adminning is sometimes viewed as completely...shall we say tone deaf?...to actual concerns about images), as it fails to address that issue.
Or, to tl;dr it: As far as I'm concerned, if the person had an expectation of privacy and didn't consent to public distribution of their image, it doesn't matter whether it's their breasts or just their face that's featured - we should not be hosting it.
-Fluff