I'm a developer, was at WWDC, and sat in the Time Machine presentations. From what I learned, your concerns about mulitple copies of a photo being stored by Time Machine are not warranted. The backing up is a bit more sophisticated and bound to get only more so as Time Machine is refined.
I've used .Mac since its rollout and have no problems with it. Free would be nice, but I think I get what I pay for.
I'm excited about Time Machine and the future of .Mac. But then, my iPhoto library is only 35 Gig and my Music library is only 55 Gig, so I may not be the memory hog that others here may be.
.Mac Needs to Be Radically Retooled