To clarify, I am fine with the way the newsfeed shows on a user's dashboard, but not when they are on the Main tab.  

>>However, no matter what the privacy settings, everyone's posts are showing up in the Main Newsfeed.

Jennifer, what do you mean by "posts"?

I ended up commenting on another thread...about friend so they can move forward with oxwall, which also brought up this issue.

I mean that I can set my blogs to private, but the fact that I've written the blog post, title, etc. still show up in the newsfeeed.  If I write something on the newsfeed, it shows up in the newsfeeds of others.  

It doesn't appear right away, but in the changelog for 1.3.2, it seems that by sending a friend request, you automatically follow someone.  Thus, even if they ignore your friend request, you can still see anything that shows up on the newsfeed as if they were your friend.  I disabled the newsfeed on the MAIN page and did not allow customization.  I thought that fixed it.  However, I noticed this issue when I sent a friend request from one of my dummy accounts and noticed that the activity of the person I was trying to friend showed up in my newsfeed.  There was a blog post title, and I clicked on it...only to get an error that the person doesn't share their blog posts.  

I think what needs to happen is removing the automatic following if a friend request is sent, or at least make it an option.  For now, I just have to warn users that their newsfeed activity is never private, which is going to cost me members.