Probably people didn't notice the option before because it was not equally as large before the update the upload section was much more prominent, now that it is more prominent with an icon, people will probably notice it more often. (Correct me if I'm wrong about the URL section having an icon, I didn't notice it as much)
That's true, I suppose! Still, I don't think it encourages art theft in any way. It's still a useful service, and can be abused like any of Tumblr's other services, and I'd be disappointed to see the legitimately useful option to link to an image with a URL disappear just because some idiots are using it to steal art.
(That's not to say the update isn't terrible anyway, though. The "Cancel" and "Post" buttons being the wrong way round is the most obvious example of a change the staff made that has absolutely no good reason behind it, no positive improvements, and only has negative effects. I honestly can't even imagine what they were thinking. Like... I can't even begin to comprehend why anyone would think that was a thing worth doing! And I also think the way the text toolbar has disappeared and can now only be accessed by highlighting is inconvenient as well and a lot less user-friendly. But I don't think the "from web" image option is one of the bad things about this update. I certainly think it's hyperbole to connect it with art theft, really.)