Oh, wait a sec. I just re-read your comment – why does the “blog privacy” option turn off BP activity stream for that blog? I can sort of understand from the general sense but based on the description of what “blog privacy” does (in the WP dashboard) it doesn’t make sense.
Having the activity stream updates tied to blog privacy prevents having a semi-private community with blogs. Or is Buddypress doing a ping of something like pingomatic every time a status changes or a forum post is created?