I've been using a Gallery script called Piwigo with little success. It's templates are almost 100meg, plus it can crash and destroy itself and parts of the server. However, it has a system similar to what I discussed.
Multiple uploads were fine, but after uploading you were immediately asked who could see what for each of the photos, even they were all in the same directory. Unlike Piwigo itself, the user system was fantastic. It shipped with the following:
If you selected Family, it showed all the photos in the directory unless they were for admin's eyes only. I thought family was great, because there's stuff the family may want to see, but friends don't.
I think Admin is an improvement on "Me Only" because I don't encourage members to use my site as a place to hide their private photos.
I did discuss this with the previous moderator once and he said I could extend privacy levels because they were just numbers. Unfortunately it was something I wasn't able to maintain as the versions changed. This still only applied to albums of course.
I realise there's no such thing as a perfect world, but many of us Dolphin users will remember that the photo module was one module that was never updated. Many threatened to do so, but no one ever did. Deano has made a few changes which are fantastic, but the module still needs work. I've made suggestions in the past and maybe this is something additional that could be considered.