Yeah, private chat is pretty broken right now.

The issue isn't so much that it was never finished; it's an inherent design flaw.
When you post a normal chat, it gets sent to the Holy Worlds server, which then sends it off to all the computers currently connected to chat. When you post a private chat, it still sends it to all the computers, even the ones that aren't supposed to see it. However, it includes an instruction telling those computers not to display the post, just to forget it's there.
However, some browsers ignore those instructions, so some people are still seeing the chat. It's also possible to tell your computer to ignore these instructions, but none of us are malicious enough to do that.

The right way to do it is the have the Holy Worlds server only send the private chats to the computers which are actually supposed to have it. That would make reading other people's private chats impossible. Unfortunately it's very difficult to do within the current chat framework.
Now, this isn't the only thing that's hard to do with the current chat system. There's a bunch of other stuff we want - chat logs, separate rooms, avatars, and more. For this reason, we've decided that chat needs a complete rewrite, which I'm working on right now. The new chat does private chatting
right, so nobody will be able to see it.
Until then, I recommend that you use PMs instead of HW Chat for stuff you don't want other people to see.
