Instagram is very popular on Facebook, and all they have to do is repair and make a statement that they will not sell your photo. I wasn't aware of what is going on until my friend pointed it out to me! People will eventually forget about the privacy issue and continue to use Instagram!
Instagram will bounce back after backlash to the changes in its usage rights. While there may be existing backlash, Instagram is very popular among Facebook users alone. These users are not going to stop using as a whole just because of these changes in its usage rights. It is a very popular website and its popularity will not become stagnant because of this decision.
Instagram can and will bounce back. Many people have short term memories so I think that the company can repair whatever damage was done. To be completely honest, I don't think that most people that use Instagram even know about what took place. They will be fine and have nothing to worry about.
Of course they will. People will continue to barter their privacy for the obsession of over-broadcasting themselves. The reaction to the fact that images may be used by third parties is a 9 day wonder and will die down soon. Instagram needs to make good on the pricetag that Facebook spent on acquiring them and I am sure their legal team and PR apparatus will ensure they do, even at the inconvenience of the Instagram users.