In my view, iCloud is unsuitable for any data you consider to be private, unless of course you trust all Apple employees and contractors implicitly.
That ^^
I really like the idea behind iCloud and the way it transparently moves everything in and out of the cloud, that's really the way I'd expect it from Apple, and it's elegant from the usability perspective. Unfortunately, unless the data is encrypted on the clients in a way that only can be decrypted by the clients (and not anywhere else), iCloud is a severe threat to its users' privacy. Which is unfortunate because it shouldn't really be that hard to do it right (I've outlined my ideas in Solution to iCloud Privacy: Smart Public Key Encryption, see http://bit.ly/mRShuy).
It's easy to come up with lots of situations where you wouldn't really want your data to be stored on some server in some data center in a way that has any risk of falling into the wrong hands, or anybody else's hands for that matter. No need to be involved in anything illegal - just think of pictures accidentally taken (or intentionally - but not meant to be published), documents with confidential data (business plans, for example ;-) ).
While I'd certainly like to have all of these automatically distributed on devices that I have control over (my devices, my data, responsibility and control) - I just don't see myself taking the risk of having that data on servers I have no control over. I really hope Apple realizes this and implements a proper solution before they ruin their reputation by becoming the very definition of Big Brother.
And from a technological point of view - it's really not that hard to do it right (even when it comes at a tiny inconvenience for users when adding new devices).