So let me see if I can get this right.
All photos are in the cloud. If I select that option, the ones on the iPad are reduced size, a great idea. Now I want to send you a copy of a photo from my iPad. Which one goes? Big or small or do I select like in the past?
If I use Snapseed to edit a photo which photo does it get? The big one or the reduced one?
If I delete a photo from the iPad does it delete it from the cloud,i would hope no or it isn't a backup at allt!
If I want to delete a photo from the cloud how do I access it from the iPad since safari won't access it. And if I want to send you a photo that I removed from the iPad but it is still on the cloud how do I get to out to send it?
So much confusion!
You are overthinking it. It's simple. You do everything in the Photos app. Everything. Depending on your options, it makes some different storage choices in the background, but it works exactly the same
For anything except 'looking' at the photo in the Photos app it will download the full size. That includes editing, sending, or whatever. That's if you choose the Optimize iPad Storage options. If you choose the other, then the full sized photo is already on your iPad, but still synced with iCloud.
You still have the choice to change the image size in Mail, but that's done in Mail, after it's access Photo in full sized. (or maybe it's smart enough to choose the smaller photo if you decide to mail a smaller photo)
If you have a huge photo collection and limited space on the iPad, you'll want to go the optimize route. If you have a modest collection and plenty of space, you'll probably want the keep local route for speed and availability of full sized photos when off line.
Hold in mind, that even when Optimize is turned on your most recent photos will still be on the iPad in full size.
And also, don't forget that this uses your iCloud storage space. It counts. If you've only got 5 GB, iCloud Photo Library will eat it up fast.
The iCloud Photo Library is exactly what you see in the photos app. You delete it from the Photos on the iPad, and it's deleted from the cloud. There is no more, 'my photo is in two places that I delete separately' that you saw in iOS 7 Photo Stream.
Yes, it's more complicated in the background, but you as a user don't have to worry about any of that. Just use the Photos app to manage your photos.
Anyway, that is how it is supposed to work, and how we hope it will work; with the provision that I'm still half guessing. I don't' have a nice neat Apple document to back up my comments.
That said, I'm still not sure how things will act between different devices, especially if they have different settings and/or different versions of iOS. Will local files stay on an iPhone if you delete them when they show up on the iPad? I don't know.
And remember. It is BETA. Things may not work exactly right, and it's subject to change at a moments' notice. Or with no notice at all.
When I feel like it, I will probably experiment a bit, but even when I do it will only reflect my set up; which is exactly the same on both devices.