Does hashing really provide much extra privacy when looking up phone numbers or email addresses. Especially for phone numbers the entropy is tiny, it is trivial to precompute all hashes for all phone numbers in most countries.
it doesn't provide much extra privacy, given the rainbow tables are trivial to compute, as you say, which is why we haven't prioritised this historically. moxie wrote well about this at https://signal.org/blog/contact-discovery/.
however, it does provide some defence-in-depth against Identity Server inspecting the email & phone number details in plaintext, so we'll go sort it out as per https://github.com/matrix-org/matrix-doc/issues/2130
