I find this outcome disturbing. These people were clearly in their private residence, not in a park or on a public street. They photographer was/is selling the images thus using them for commercial purposes. The fight would be far from over if that was my child being featured in an exhibit while photographed through the windows of my home.
Not liking this one at all.
The only ones recognizable were the children, and he removed those images and agreed to not have them as part of the exhibit.
In today's world of cell cameras, I would bet that there's more than one "unauthorized" photo of you and/or your children somewhere "out there".
As far as their being in their "private residence", it doesn't matter. The law is clear that as long as the photographer is in a public place (or his own residence) he doesn't need the subject's permission, and it is legal. May not be ethical, but legal, yes.
When you live in a house or apartment with large windows, you set your self up for "voyeurism", whether it's a photographer or a "peeping tom". Curtains were made for a reason . . . I draw mine at night, and I live out in the middle of nowhere . . . but then I'm afraid of things that go "bump in the night."