Bitcoin is and has been highly scrutinized for years now, and there's no way any legitimate ATM operator is going to get away with granting low fees and maximum privacy to the people who use their machines. That's not the world we live in, unfortunately.
A harsh reality. The governments and authorities know they can't take away the privacy of every Bitcoin user, so they will always make use the opportunities they can find, and in this case, it's the Bitcoin ATMs that they scrutinize because they know, some people would want to use them, so they have enforced KYC for them, and as you mentioned, security cameras at ATMs are a norm, be it normal ATMs or Bitcoin ATMs, they would want to have your footage in their database.
I've also always wondered why people use Bitcoin ATMs when they can more easily and conveniently purchase Bitcoin online through different platforms, and we still have decentralised P2P platforms such as Bisq for those who are too privacy-conscious and don't want to use centralised platforms. For me, I think using a centralized exchange for buying Bitcoin is way safer than using an ATM, even though both require KYC, at least the first one wouldn't give you the fear of getting chased by muggers and robbers.
Government doesn't care about privacy, in fact you don't have anything related to privacy when it comes to finance, the government institutions is designed to see everything you are doing, how you spend the money and when you spend the money. Bitcoin ATM are just one of the easy route to get access to Bitcoin but privacy is really far from it, you are involved in the transactions that you make and the Bitcoin you receive is already KYC coming from the machine.
If you don't want your Bitcoin to be watch and analyze, Bitcoin ATMsm isn't the best place and I'm not sure decentralized p2p gives you full privacy. One of the advantages of using decentralized p2p is your coins are not hold on the exchange, it's a market between users but the coin you are buying might be from a KYC platform. So to break this bond and have full KYC, your coin has to pass through a coin join protocol, not necessary a centralized mixers, coinjoin protocols can help with a new non KYC Bitcoin.