I think it’s so that they could accommodate a 1080p camera (previous generations were 720p). Looking at other laptops with 1080p cameras, manufacturers have approached this in a few different ways such as a thicker top bezel or a protrusion upwards beyond the rest of the bezel (This shows some computers but is certainly not exhaustive: https://www.adorama.com/lists/laptops-with-1080p-camera). For the MacBook, it’s a reasonable compromise because MacOS has the omnipresent menu bar (except full-screen mode). The top-center portion of the screen isn’t used most of the time. That being said, the height of the menu bar was increased on Macs with the notch, so I’m not sure on the difference in usable space. I would certainly like to see Face ID on the Mac in the future though.

I didn’t think any devices even adopted Ethernet over HDMI

Is this a HomeKit camera or are you using third party software? HomeKit allows for defining zones for activity detection (so you could exclude an area) and only sending activity during certain times. If you don’t use HomeKit, maybe your camera software has a similar setting.