Actually, this DOESNT work, Emails still ended up going to Moodle Site users, I'm going try restricting the Announcement to a Grouping instead with the hope that ends up fixing my email subscription problem.
For the record, this worked, I created a Grouping and restricted access to the Front Page Announcements to that Grouping, which changed the Subscribed Users list to only Students from the Grouping.
I also have Students set as my default Portal Role.
I then ensure that Guests and Students have the View Discussions permission turned on, so that non-logged in users can also see the discussions, which is what I wanted.
kind regards,
Brad