As an update to the previous post, the January 1, 2003 article "Drones at Home: Big Market, Big Concerns" has more. Unfortunately, it's in their "TechNews" section, and almost all of the "Big Concerns" involve the safety of other aircraft, not the privacy issues. The only mention of privacy is this:

Already, some in Congress are beginning to consider the idea. "I have long supported the use of Unmanned Aerial Vehicles (UAV) by the U.S. military, and I believe that the potential applications for this technology in the area of homeland defense are quite compelling," Sen. John W. Warner (R-Va.), chairman of the Senate Armed Services Committee, said in a prepared statement.

Warner called for a White House study on the use of drones by domestic federal agencies, acknowledging that there could also be privacy concerns -- drones are used by the military for surveillance in a way that might not be acceptable to American civilians at home. "We must . . . meet our national security needs without unduly sacrificing the privacy rights of our citizens," Warner said.