A couple of us are working on a privacy component for BP that will effectively provide the functionality you are after. It will be user-centric, allowing each user the control over who gets to see what and when.
Ok Jeff, I guess I’ll have to wait then.
Oh, and one question on the coming privacy component.
Does it only work if we use xprofile turned on? If xprofile is turned off (meaning using wp’s default profile.php info), will the privacy settings still work?
The simple answer is no.
The simple answer is yes.
You asked two diametrically opposed questions!
The privacy component derives the basic user data from the wp_user table, specifically the ID field. The BuddyPress xprofile tables all refer back to this particular field to relate their record-level data. So, in essence, there should not be any issue if you disable the xprofile component.