Earlier quoted context omitted.
But you do have to take into account the context of what they are doing. Yes on a technical scale it is similar to a mitm attack, and yes in theory they do have access to your email content, but I don't think that by using an interesting trick to add a useful feature should put them in the same category as sleazy hackers secretly trying to steal your credit cards and such.
Does it matter? They are purposefully inserting themselves into a stream of information which they largely have no business being a party to. If (when?) this proxy service is compromised are they willing to be accountable for any information which leaks? I can't imagine wanting to even take on this risk (maybe I'm too conservative). Edit: I just want to add - yes, it's interesting. Yes, it's sleazy.
to implement a feature that's impossible to do any other way. They have a justification for doing this.