When setting the privacy of a post, no matter what the privacy settings are they show up in the latest update section of that persons profile and everyone can see it.
If you go to their rtMedia demo site, log in as the demo account, create a private message and then look at their account, you will see the message at the top of their profile that you just set to private.
http://demo.rtcamp.com/rtmedia/members/demo/
If anyone knows a fix for this or when it might be fixed that would be awesome!