On the other hand if it's on a hosted server that you have control over, they know whose server it is but they don't know what it's doing, and without a wiretap they don't even know who's connecting, and they can't see any encryption keys or content if encryption is used well.

Imagine a world where we all use Gmail, and one where we all host email on our own servers the host can't get into. In the latter world, a wiretap can identify who's sending mail to who, but not read the email, nor identify the IP address that downloaded any individual email. That's a severe handicap for them over just being able to read your mail. If you have 10 people on each server, they get even less info (but the server owner gets more).