Found that hard to believe, so I googled it. Not positive this is a trustworthy source, but it sounds like Dropbox does use encryption for files at rest and in motion: https://www.virtru.com/blog/dropbox-encryption/
Dropbox is known to have intergration with PhotoDNA, a state program that matches file signature with a database of known illicit images. This would be impossible if the encryption used is irreversible and as far as I know dropbox never claimed otherwise.
Couldn't dropbox hash the images on the client, and upload the encrypted images as well as the hash? No need to upload an unencrypted file to do matching.
Depends on what kind of hashing they do: a scheme like yours using a cryptographic hash would be defeated by just randomly changing a single bit in the image (eg appending some garbage bytes at the end); or re-encoding the jpeg. Of course, it could still catch non-techy people.
I'm not claiming it is end-to-end, nor did I expect it to be, but perhaps some people would assume that. I thought you were claiming they don't use encryption at all.
You shouldn't be trusting your commodity cloud storage provider for that stuff anyway. Use your own client side encryption program to encrypt whatever you need to. Arq, borg backup, zip files with a password, sparse encrypted dmg directories, etc.
There's no encryption there at all, except TLS in transit.