So that means addresses in a wallet is very easy to be associated. Then not-reusing address is not enough, and we have to generate a new wallet for each transaction?
Even if people all generate new address for each transaction, since the addresses in one wallet is easy to be found associated, their addresses are still can be classified into one big 'address family'. So there may be no 'well known address', but 'well know address family'. Did I make any mistake here? If this is true, why the trouble?
No, if you use each Address only once, it will be completely empty after you send BTC from that address the first time and will never be used for any transaction again. There would be no difference in creating a new Wallet.
The client takes care that Change addresses are only used once, the only thing you have to do is to use addresses for reviving transactions only once.
If you only revive at B one time, there never will be a B-2 Change.
Unless what you send exactly equals to what you received before, otherwise there's a change and the change needs to be sent to a change address in the same transaction. So if you see a transaction S -> A and S -> S2, you know it's highly likely S and S2 belongs to the same wallet. As a result, your address S is associated with the change address S2, but not so closely because you can still claim (arguably weakly) that you are sending to two different people simultaneously and happens to used up all the unspent amount of S.
Then let's say you have change address A, and change Address B, they all have 0.5 BTC and you want to send to user U 1 BTC, then this time you will see A -> U 0.5 and B -> U 0.5. This makes a strong association between A and B and every one knows A and B belongs to the same wallet.
Therefore, it is easy to associate the addresses in the same wallet by analysing the block chain.
If you don't reuse the address S. It will never have an unspent output after this transaction again. If you use every address only once. S will receive exactly 1 Transaction and never again a second one. Therefore there will never be more than one change address for ever address. And it's impossible to tell which address is the change address and which one is the reviving address.
Changing Wallets here makes absolutely 0 difference. That was the point.
What you are missing here is that a wallet may contain many unspent txouts from receiving many payments from different sources before there is any need to purchase something with the wallet.
Lets say I sell alpaca socks out of a truck down by the river. I would be receiving many 0.10 BTC payments from different individuals to different addresses, suppose for a total of 20 .1 BTC payments in my wallet.
Now, I donate 0.95 BTC to a known-address donation site and say to everybody "hey, I just donated!". There will be a 0.05 change back to my wallet, that is now considered "tainted" - based on my declaration of donation, or the site owner saying "thanks for donating, deepceleron", it has become simple to figure out my donation AND determine which is the change back to me that is still in my wallet.
So I've got 1.00 BTC of sock-selling money that 10 sock buyers know the address of, and 0.05 that anybody interested can know about.
I then send the entire contents of my wallet to a man-boy snowden tibet love honey pot that is supposed to be anonymous, but is monitored or busted by a government. Even with this site using one-time addresses, the previous use of a reused address has compromised my identity and made my payment have little plausible deniability, due to my control of the change. The "change" could have been a multi-send to a third party, and the third party may have made the illicit payment, but LE will not care to investigate so much when they need doors to kick in.
The disclosure is because you publicly donated to a know address and later send money to another well known address (at least known to the authority), and it of course make your address public and makes all your efforts in never reusing addresses void.
I believe if someone wants to do some problematic donation, he has to create a new wallet and use some mix service anyway.
