I've set up a draft version of the policy to demonstrate what issues I think can be addressed:
http://meta.wikimedia.org/wiki/User:Avruch/PPdraft
It addresses some issues raised on this list and some I identified, particularly:
* Consistent terminology: Projects are variously referred to as projects, wikis, WMprojects, WMProjects, Wikiprojects, etc. Wikiprojects (to take an example) means something else entirely at least on the English Wikipedia, and so should probably be avoided. In most cases I've changed the usage to simply "project" or "projects." Wikimedia Foundation is variously Wikimedia, WMF and Wikimedia Foundation (although I didn't see the term WMF defined, it may have been). I've made most of those instances consistent.
* Editing for length: I think there are a number of paragraphs that could be condensed without losing readability or meaning. I've done a bit of that, most especially in the first half. Might not be able to save a huge amount of text this way, but there are definitely opportunities.
* Formatting: A couple of formatting issues, actually. I've altered the header format to flow better and look better when displayed on Wiki, and made the use of headers, bullets, subheaders and bolding more consistent. I've removed the "Introduction" header just as a style difference, since its the first text in the document anyway.
Mainly I think the policy works. Its definitely longer than most privacy policies, but its also far more comprehensively written. A couple good reasons for that - the Foundation has an opportunity to collect a lot more user data than most other sites, and its policy is aimed at limiting the Foundation and protecting the user rather than allowing maximum flexibility for the corporation and its protection. All it really needs is some good copyediting - for length, internal consistency and clarity.
If you want, this version can be copied into the other draft version as a revision (and then reverted) so that the differences can be easily seen.
Nathan