Privacy reduced with new Firefox Sync?

The old Firefox Sync (before Firefox 29.0) came with end-to-end encryption. This technical limitation prevented Mozilla from reading the contents of users' browsing history and passwords.
If I understand correctly, the new Firefox Sync stores the encryption keys on their own servers (instead of the users' browser). Does this mean that Mozilla is now required to pass on this private information to police, NSA, and other government agencies when required, and is susceptible to mass data breaches from bad actors?
If true, are there any alternatives to the new Firefox Sync (short of hosting my own Sync service) that continue to use end-to-end encryption?

Brian Warner's blog post seems to address the question: "Sync will still provide end-to-end encryption, but accessed by a password instead of pairing."
https://blog.mozilla.org/warner/2014/04/02/pairing-problems/
The first comment on that blog post mentions the new password method is one-factor authentication rather than two-factor authentication of the original "pair devices" method.

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