Ultimately, the problem is much bigger than /etc/machine-id since there are dozens of hardware IDs on any PC that can be used by malicious telemetry to silently to uniquely identify and track you, and the only solution to this problem currently is to make sure you really trust any software you use.
Systemd, in particular, acts a lot like malware for Linux because if you try to reset your machine-id a long list of stuff that breaks in in it. You could make a cron script to reset /etc/machine-id every day, but machine-id is so deep in the stack that you’d also have to reboot to ensure it’s updated.
I’m not sure if the principles have been gutted like you say. Fedora, for example, uses systemd, and is supported by the commercial RedHat. And yet it is well regarded in the Linux community, and has firmly stuck to open source and pro-privacy principles. They foster diversity too, like the Fedora Atomic and Universal Blue projects, which make it easy to fork distros and create new ones. Not to mention, Linus Torvalds uses Fedora.
One could say that Linux is already growing at its own pace. There are some that wish it would move slower, some that wish it would move faster. systemd wasn’t forced on distros. in fact Ubuntu fought it for years, since it was created by their competitor after all. Yet Ubuntu still adopted it in the end, so it must have been worth it.
The way I see it, back in the day, Linux was too fragmented in some areas, and at the same time lacking isolation in others. Systemd standardized and addressed the fragmentation, while containers introduced isolation where needed. The lines are being re-drawn. But I don’t think the principles of Linux were compromised that much.