Aren't many of the newspapers in England tabloids? I know Tom Cruise has successfully sued the London tabloids for saying he was gay when he says he isn't. There have been interviews with supposed ex-male lovers in those papers. As for pictures, I think those papers push the envelope as far as they can go. I would suspect that printing the pixelated pictures and all the sales that would garner would be a better financial deal, even if it meant paying off a lawsuit than not printing them at all.
Many, yes, all no... there are actually a few very good papers out there (though some of them are slipping a little). There are broadsheets still (though many of them have started to print in a tabloid format they are still broadsheets in attitude) - The Times, The Guardian etc.
The Tom Cruise example works because there was no evidence either way - it is therefore libel. It comes down to their word against his and the school yard politics of journalism usually ends with the celeb winning unless the journalist produces really good evidence... however, in a case where the paper has a photo of the person doing it... thats more difficult to prove they are wrong.
Oh, I do beleive that it is usual for newspapers that have something like this to approach the person involved and ask for a comment before they publish - something they can add to the story. This might be the night before and the conversation might be along the lines of...
"Hello, I am XXXXX from the News of the World. We have recently come into possession of photographs of you and XXXX in a swimming pool in Barbados earlier this month. have you anything to say about this turn of events? If you give your side of the story, I am sure we can paint these events in a slightly more forgiving light..."
Of course... in a fiction story, there is nothing to stop a really dodgy journalist trying for blackmail here
