How was the hypothetical overcautious lawyer able to independently come up with such a specific scenario, which would require intimate technical knowledge?

I believe your are missing a third option, which is a synthesis of both. This is that the engineers reported that their sensor data could be used to collect sexual activity. However, in response to that, the corporation preferred to cover themselves legally rather than making any technical effort to address the risk on their customers' privacy.

The lawyer is not being overcautious, but simply displaying the corporation's priorities. The corporation is not being evil, it is just being psychopathic.

Over the past couple decades I’ve been giving companies and our government the benefit of the doubt. And I’ve been burned every time.

Not only am I wrong, always, I’m extremely wrong. In fact the conspiracy theorists are often wrong too - they’re too lenient.

After Snowden, we should all understand that whatever the worst case scenario is, it’s probably worse than that. If you can think it, it’s probably happening. If they allude to it happening, it’s definitely happening.