In end-to-end encryption the private keys are on the user's phone. The point of a wiretap is not to let the target know you're listening. Having the code source + user's public keys from WhatsApp is of no help in decrypting.
Yup. E2E crypto with keys stored on the conversing devices shuts down all MitM attacks. It doesn't stop targeted attacks (warranted or unwarranted), but I expect that law enforcement considers passive data scraping to be much less serious than targeted surveillance.
