I don't really see this as any loss of privacy in any significant way... though I wish the public had some kind of tangible benefit (safety, less tax, etc) from them implementing it.
1) The whole point of having a license plate on your car is so that it can be uniquely identified, and
2) The system can probably be defeated by any of the means people use for photo radar, such as never washing the back of your car, or having a cloudy license plate "protector" (aka "obfuscator") on it.
Personally, I've always thought it would be sort of handy for purposes of recovering stolen vehicles, getting the license plate of the so-and-so that just cut you off, etc.
It seems this, as with many recent "privacy" issues, illustrates another situation where technology is just overcoming the inconvenience of of a task people "assume" others are too lazy to do manually. For example, in Oregon, the DMV got yelled at for selling CDs of all license plate info in the state. The argument was that someone could cruise the airport parking lot, look up the plate of a lexus or porsche, and find out whose houses to rob. Well, there's not really any reason they couldn't have done that before, it's just a matter of less accountability/traceability, less immediacy, and less inconvenience.
Unfortunately part of the cost of living in the information age is that information is ever-more-readily available -- to the good guys as well as the bad guys. To a certain extent, the good guys currently are the only people who can afford it, but I'm sure wealthy criminals will soon, and then who would you prefer to have the data? Because as with guns and everything else, criminals will always be able to do stuff like that (see also: identity theft), regardless of what laws might be in place.