1.) Germany has civil laws giving a person depicted similar rights as the creator of an image. It is also an criminal offense publishing images, that are designt to damage an persons public image, Those aren’t perfect, mainly because there wording is outdated, but the more general legal sentiment is there.

Germany also has laws criminalizing insults. You can actually be prosecuted for calling someone an asshole, say. Americans tend to be horrified when they learn that. I wonder if feelings in that regard may be changing.

AFAIK, it is unusual, internationally, that the English legal tradition does not have defamation (damaging someone's reputation/public image) as a criminal offense, but only as a civil wrong. I think Germany may be unusual in the other direction. Not sure.

2.) The police traces the origin through detective work. Social Cycles in schools aren’t that huge so p2p distribution is pretty traceable & publishing sites usually have ip-logs.

Ok, the police would interrogate the high-schoolers and demand to know who had the pictures, who made them, who shared them, etc... That would certainly be an important life lesson.

The police would also seize the records of internet services. I'd think some people would have concerns about the level of government surveillance here; perhaps that should be addressed.

How does that relate to encryption, for example? Some services may feel that they avoid a lot of bother and attract customers by not storing the relevant data. Should they be forced?

3.) It gives the police a reason to investigate, gives victims a tool to stop distribution & is a way to compensate the damages caused to victims

That's what you want to happen. It does not consider what one would expect to actually happen. It's fairly common for people of high school age to insult and defame each other. Does the German police commonly investigate this?

All they have to do is make public examples of some kids and parents and that will be an end to this in a couple years.

You say what you (don't) want and trust in the experts (IE your representatives) to get us there. That's reasonable. Suppose no new laws are made, perhaps because the experts think that new laws would do more harm than good, would you continue to trust the experts?

Eventually, after an investigation, police referred the case to a local prosecutor, noting that there was a probable cause to charge the student who admitted to making the photos with “Cyber Harassment.”

This is what was reported about this case.

Here is that Cyber harassment statute: https://app.leg.wa.gov/rcw/default.aspx?cite=9A.90.120

What's missing?

Wait for ASICs. When I started mining bitcoin on dual core cpus I would have never believed a little USB stick would be doing 100x what 30 of those full sized pcs could. The software behind generative models still needs to be fleshed out for hardware to know what direction to go. But a little AI machine that only draws like 50w max but has 256gb of high speed RAM for model storage is not far away. Anyone with $500(or whatever idk) will be able to order a machine off ebay, load it up with whatever models they want, and start generating whatever they want locally.

the Taylor Swift porn deepfakes were Dall-e.

Got a source for that? I only have experience with DALL-E 3, but that is really picky about nudity, copyright and portrait right.