The London event in particular has a photography policy. This has been tweaked a bit in the last few years, but the basic idea is that that photographers should ask for permission before taking photos. There was a debate about that in 2005 at photo.net, where some people objected to the policy quite strongly. More recently, there have been some discussions about this at the WNBR London Yahoo group. Peter Marshall (photographer) also wrote about this, and I basically agree with him.
Really, there are two conflicting issues here. Some people are saying that they feel uncomfortable if they're surrounded by people taking photos, particularly in the assembly area before the ride started. However, other people are saying that you don't have any expectation of privacy in a public place, particularly if you draw attention to yourself by going naked.
I don't think that nudity is necessarily the key issue here. For instance, the 501st UK Garrison are a group of people who dress up as Stormtroopers from Star Wars. Suppose that they decided to trade in their landspeeders for bicycles, and do a cycling event; this would be sufficiently unusual to attract a lot of attention, so I'm sure there would be lots of photographers wanting to wander around and take pictures. (I don't think anyone's done that yet; the nearest pictures I can find are Darth Vader, a Stormtrooper and Ben Kenobi Taking a Spin on a Bicycle and Stormtrooper riding bicycle.)
In fairness to the photographers, I think there is a wider context. In the last few years, some people have been getting quite nervous about terrorist attacks, and they get suspicious if they see people taking photos in public places; presumably they're worried that the photos might be used to plan a bombing. Bruce Schneier describes this as "the war on photography", and wrote about it in The Guardian last year. In response to this, some photographers seem to be becoming activists: "I know my rights! This is a public place, and you have no legal authority to stop me taking photos here!" Mind you, this moral outrage can be misplaced; I heard someone talking about this recently, saying that he'd argued with the staff at a railway station, and he was surprised when another photographer told him that stations count as private property. (I think that's why they can insist that you have tickets before you get in.) So, this can cause problems when people from the WNBR appear to be exceeding their authority, and it leads some photographers to dig their heels in.
On the flipside, some of the cyclists don't help matters. Some people have been suggesting water pistols, but I really don't think it's a good idea to deliberately damage someone's equipment. More generally, I think it's best to avoid a confrontational attitude; it's better to resolve things peacefully.
Really, I think that this is more about manners than laws. One simple rule of thumb is: "Would this be ok if I didn't have a camera?" For instance, if I'm doing the tourist thing, and I stand around looking at St Paul's Cathedral, that would be fine, therefore I don't see a problem in taking a photo. Similarly, if there was a parade going past (e.g. Trooping the Colour), it would be fine to stand there and watch everyone, therefore it seems ok to take photos too, without needing specific permission. On the other hand, suppose that I saw a couple of people having lunch in the park, and I walked right up to them and stared at them while they were talking. Technically they're in public, so they can't expect privacy, but that would still be rude, and they'd probably tell me to leave. So, in the same way, I think that paparazzi behaviour is inappropriate.
This photo gives a rough idea of what I mean. It's not a perfect example, because I'm pretty sure that in that case the subject was happy to be photographed, but there were similar groups of photographers crowding around people who were a bit less enthusiastic. That didn't happen to me, probably because I'm neither female nor in peak physical condition, but I can see how that would make some people feel uncomfortable. I think it's quite different to have people standing by the sides of the road taking photos as you go past in a group. I didn't realise this at the time, but when I watched some of the videos afterwards I saw that the police were moving photographers off the middle of the road, so I'm glad they did that.
One other aspect to all this is copyright. Obviously it's difficult to enforce anything like that once you've put photos on the web, but people can still make requests. I mentioned Peter Marshall earlier, and he has several photos here. One of them includes me, and that's fine; as far as I'm concerned, the main point of the ride was to get publicity, so it's a bit silly to complain when that happens. Still, I find it interesting that he doesn't need my permission to put a photo of me on his website, but I need his permission if I want to make a copy of that photo. So, he has more control over my image than I do! In fairness to him, he sent me a high-res version, and gave me permission to put it on my blog as long as I acknowledged the source (which I'm quite happy to do), so I'm just pondering the general principle rather than this specific case.
As a side note, I'm slightly concerned about the number of people who were taking photos as they cycled along, purely from a safety point of view. This is partly because you'll have less control over the bike (particularly the brakes), and partly because it may act as a distraction (particularly if you don't watch where you're going). I'd say that this is similar to using a mobile phone while driving, so I wouldn't do it.
Edit: Speaking of paparazzi, there was a wonderful story in the news a few months ago - Woody Harrelson claims he mistook photographer for zombie. Apparently he'd been filming a zombie film for the last few months, so it was a natural mistake to make, and that's why he punched the guy in the face. Largo would be proud!