OK - first off - thanks HP for helping provide such a useful module AND for your help supporting the community and users like me! 
I think I've figured this out. I'm not sure if this is feature design or unresolved issue (although it might become a "feature request"... ! Here's what I've learned and the use case:
1.) I created a DNN site with a home page, a blog page (and some others...). Since the site contains a variety of information and topics, I wanted to aggregate the "latest" from each section on the home page to so that users could go there, see what was new, and click to it. Pretty basic stuff.
2.) For the Blog module, I've been blogging privately for a while to build up content. My plan was to then output RSS to either the RSS or XML module on the home page, style it with some basic XSL, and have a nice long list of blog posts when I go live.
3.) Here's the catch: while developing, I was working in either "host" (design) or "registered" (test) user mode. In either case, the Blog module, and page it was on, as well as the home page, were all visible - even for the "Registered User" security group. But, the RSS would not render in the RSS or XML module. I checked description fields, proxy issues, web.config / .NET user trust levels, etc. Nothing worked.
4.) Finally, I decided to change the page and blog module privileges to "All" - i.e. let anyone see it to determine if it was a permissions issue. It worked! (phew!) So, I know now that this should work fine when I choose to turn it on for the public.
Here's the issue - I'm not sure if it's a Blog mod or DNN issue: I think the modules should inherit/work with respect to the security group settings. (i.e. if a registered user can see the Blog "Latest Posts" module or individual blogs, other RSS/XML modules on other pages they see consuming the RSS feed from the Blog "Latest Posts" should render correctly. This could be critical for sites that have a variety of security groups and targeted content (i.e. blogging/RSS is an AWESOME way to quickly create content and updates to the site) that need to segment what specific groups of users see based upon security group role. As it stands now, it *appears* to be all or nothing.
To be clear, the Blog mod is awesome and I'm definately NOT a pro DNN developer. So, I'm not sure if this is a DNN or the Blog module issue. It is something that I'm sure others (including myself) could benefit from as functionality (note: I say this realizing this is a volunteer development effort which is incredible .
I thought I would at least share this use case and thank you for the great work you're doing. If I can provide more details/info about this, let me know!
Cheers,
- Jeff