Woah, big topic. I'll try to condense my reply as much as possible, sorry for any terseness.
Blogs that aren't public are, in my opinion, not blogs. And I don't think anyone that considers themselves a blogging expert i.e. goes to conferences and has 'blogger' in their job description or business card is going to think so either. You could probably make a case for intranet-blogs within a organization or school, but private blogs in particular, that is one's that only the author can read, boggle my mind and stretch the concept further than it can go.
I think if you are going to take advantage of externally generated concepts like blogs or wikis, then it is counter-productive to drift from what these things mean to non-Moodlers. Otherwise people can't tranfer their knowledge.
I fully support combining these things in the back end code, but suggest moving them further apart from the users perspective. This means getting at the nub of the problem and not deviating from it, especially not just because you can.
So getting back to 'private blogs' as an example, keep the functionality, just don't call them blogs. Call them 'notebooks' or 'journals' or something that reflects the core of what they are and then remove an unneccesary option from blogs. Remember that flexibility is often a bad thing in software design, as odd as that may seem.
"Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away."
There is also the issue of control to think about. I assume that educators each have an idea of what kind of communication they are trying to foster. If they add a 'private journal' to the course then they know (or at least hope if it is truly private) that the student will be using that for noting down their thoughts. If a blog allows private communication, group communication, class communication, Moodle-wide communication and public communication does that mean you have to go in and set your paramaters every time you set up a blog? Do you then need to communicate this purpose to the learners or will they guess based on what they aren't allowed to do (and are those options greyed out, or simply missing?)