The difficulty will be in defining illegal "camera" use - which can basically be lumped in with remote sensing. Arguments, especially form .gov entities would be that from the aspect of image capture, there's no difference between a small UAV at 100 feet, a large UAV at 10K feet, a manned aircraft at 10K feet, or a satellite at 200 miles. Any of them, with the right equipment, can capture very high resolution imagery and other data.
For that matter, what are your privacy rights if you live in a valley and the guy with a house on the hill uses a big ass telescope to look at your house, which again is a form of remote sensing? I don't have enough legal knowledge to even make an educated guess, but it seems that to protect privacy, as far as small UAVs are concerned, the first step might be to restrict physical access within "X" vertical feet of a private property. And that still doesn't address side-looking capability.
Right now the only physical restrictions via altitude I know of are what Avenger mentioned, and those are airspace class restrictions for safety. Then of course the general UAV restrictions in national airspace, but the FAA seems to be handing COAs out left and right for law enforcement use for small UAVs.