OK. Here is a summary of the BUG, in case it hasn't been reported (but I think it has). To reproduce the BUG, do the following:
1. In Profile, Privacy Options, enable (check on) "Starting a Project Discussion Topic" and "Posting in a Project Discussion Topic".
2. Go to one of your private projects.
3. Post a New Discussion Topic
4. Ask one of your friends that is not part of the Private Project to review your feed ... they will tell you that they can see both the New Topic and the Reply in your feed.
If you un-flag the two items you had flagged, your friend won't see the topics anymore (new ones)
This tells me that the Privacy Options are working as intended, but they are not being over-ridden by the privacy options on the project profile. In my opinion, you should be able to show project discussions through your feed, however, the privacy of the project should over-ride that setting.
Hope this helps.