That's a solution that prioritizes privacy over reality, and I'm not sure we collectively want that. Mutilation of truth in the name of protection etc...
I don't think that's better. For something like Street View that's explicitly supposed to be capturing reality, I want to know when that reality has been censored. Realistic face replacement breaks that.
(And yes, I'm sure Street View imagery is edited in other ways before it makes it to production, but I think it's important that our view of reality remains as real as possible.)