My little attempt at a test didn't work so well - I set my default minimum privacy level on LJ to friends-only, and left my DW privacy level at public, then used the cross-poster (same browser, same window as I changed the privacy settings on). The DW entry was public - but so was the LJ copy.

I went back to my privacy settings on LJ just to make sure it had logged the change correctly, and it was still set to friends-only minimum. Made a quick test post to LJ with Semagic (and with privacy level in Semagic left at the default "public"), and this second post was posted friends-only.

So my conclusion is that LJ's minimum privacy settings were working, but DW's cross-posting didn't respect them for some reason. (Edit: After reading back up the page, it seems the privacy settings may have worked at first, then DW turned the LJ entry public when I edited a typo, since that's happened to at least one other person...)

But since I wasn't really too concerned about the privacy settings at the moment, I'm still going "Woooooooo crossposting!" over the fact that we have it at all, and it's pretty smooth. ;)