Culex or anyone,
Did you know that posts designated "public" before posting cannot be seen by those who are not friends (posts with public or private designations act the same).

This means that people cannot create a publicly viewable teaser of their persona so someone might become interested in befriending them.

Can anyone who uses Smallworld actually see others private messages without befriending them? Maybe my understanding of how this feature is supposed to work is wrong.

No you're correct.

The private feature is intended to be for sharing. If marked public you have an option to render to (facebook, twitter etc), if marked public the share feature is off..

At the moment I'm writing new code to give an option for all users (incl anonymous) to read posts and comments which are marked public if set by admin.

It's a bit tricky because it ought to be set in index page (startpage idea) but still make commenting, uploading and accessing search and profile items unavailable for non friends, and non users.... But I'm getting there.