This article from Internet Week has Alan Eustace, VP of Engineering for Google, on the record talking about the My Search feature.
“Anytime, you give up any information to anybody, you give up some privacy,” Eustace said.
With “My Search,” however, information stored internally with Google is no different than the search data gathered through its Google .com search engine, Eustace said.
“This product itself does not have a significant impact on the information that is available to legitimate law enforcement agencies doing their job,” Eustace said.
This seems pretty conclusive to me – signing up for saved searches doesn’t (or didn’t, in April 2005) change the way the search data is stored internally.
(This was pointed out to me by Ray Everett-Church in the comments of the previous post, covered on his blog: http://www.privacyclue.com/index.php?p=68)