I think the user interface here is a bit confusing.

• When reporting a bug, the private/public selection is done through radio buttons towards the end of the form.

• When updating a bug, the private/public selection is done through a combo box towards the top of the form.

• When reporting a bugnote, the private/public is done through a private checkbox.

Hence, the functionality is there and working, but it is a bit confusing. The private check box at the end of the update forms belongs to the add bugnote sub-form.

Ok, I see how it works and you are right that it can be a bit confusing.
It might help if the same type of GUI component for marking a bug private is used when reporting and updating. If it is radio buttons both places it will be easier to recognise as the same property (actually I don't care if it is a combobox or radio buttons - just as long as the type is the same in both places).
In addition the label 'private' in the 'Add bugnote' sub-form could be renamed to 'Private bugnote'.

I stupidly ran into the same problem.

IMHO the most important thing here is that it is made more difficult to misinterpret the bugnote´s "View Status" as bug´s View Status, e.g. by renaming the string to "Note View Status".

Will eventually redesign the form as an extension of the modern UI work planned for v2.