it's not magical, but if Apple's 1080p camera is 'very low quality', I have plenty of experience on potato-cams to talk about, even in the previous generation.

I also suspect that the design was intended for Face ID, but that obviously hasn't happened yet. I'd keep touch ID, thank you very much.

We’ve seen the actual camera/sensor module and its mounting hardware. It is pretty close to the size of the blacked out area in the menu bar.

That notch is a very clever way to expand the size of the screen without increasing the size of the case. There is very little downside. that middle part of the menu bar is not used by most apps. When there are more menu items, the system automatically skips over that notch.