My two main concerns are if photos are shared automatically/permanently or if the same goes for sharing my location. I want to join my family’s plan for the extra iCloud storage but there are some stuff I don’t want them to be able to see, and I haven’t come across any concrete answers for those two specifically.
We have a family plan, which means we share subscriptions and money and such. If I enable iCloud photos, will they be able to see the photos in my iCloud?
According to this article by Serenity Caldwell of iMore, there are three ways to share photos to all your family members.
Use the "Family" album that is automatically created if you have Family Sharing turned on.
Create a shared album.
Use the same iCloud account for all family members.
Nevertheless, there doesn't seem to be a way to automatically share all your photos to your family members. You will still need to copy photos into the share album. (Unless you are all using the same iCloud account, which I didn't want to do, since each user already have their own active iCloud accounts.)
How many photos and videos can be stored in a shared album?
A shared album can hold a maximum of 5000 photos and videos combined. When you reach your limit, you must delete some photos or videos before adding new ones.
iCloud Photo Sharing FAQ
My Photo Stream and iCloud Photo Sharing limits
I realize this is not directly answering the original question, but the information seems relevant because if you have > 5k photos/videos then the answer becomes "No, you cannot share all iCloud Photo Library content with a family member".
No, your wife won't lose her files. Turning on Family Sharing simply adds the features to her iCloud account, which can include more data, and other features. She will see options on what of her iCloud data she wishes to share.
When you leave a Family, your iCloud simply loses the Family sharing benefits, including shared apps, photos, etc. But the data doesn't get deleted, it remains unless you actually delete to make room. This way, if you rejoin the family it simply makes the data visible again. The data does remain visible on the iCloud account of whoever set up the Family share in the first place, btw.
For everyone else that might be looking - I just got off "chat" with Apple support and they confirmed that this WILL NOT delete any files - they will be copied to the new shared storage.