I came here to post almost exactly this. This happens regularly with the big sites - some idiot lawyer writes an overly cautious ToS change, everyone gets up in arms about it, the site writes an apology clarifying (and probably fires the lawyer).

It seems common sense to me if you just think it to the end: do you REALLY think taking a photo of me drinking Coke (against my will) would be good advertising? Or selling my photo as a stock photo without compensating me - that that would fly? Really? It seems absolutely obvious to me that Instagram has no interest whatsoever in doing what people are all afraid they'll be doing.