You mean a bad actor could spam the network with txs to themselves?
They then would know that anytime those outputs appear as inputs to another tx it is a decoy and not the true spend.
This is generally assumed to be low-key happening.
Im not up on the math but with a ring size of 16, I think you have to be responsible for a insane amount of the total tx volume to be statistically certain you're identifying the correct spend.
like over 95% of total volume and that's not happening.
meanwhile we have leaked Chainanalysis videos that literally SHOW us their tracing capabilities and they're basically dead in the water.
(UNLESS they get offchain stuff, exchange data or you connect to their malicious node without a condom etc)
Block size is a delicate balance and I'm not sure there's much to say except we'll find out. Since the block reward is penalized miners will only increase the block size when it makes financial sense for them to do it. ie, they can make more on fees than they lose by the penalty.
so far it has functioned fine.
last I checked the chain was 220gb. Still a long way from any urgency.