Search the files? A regular LW search will not reach the entire network. So yes it can be such that files you find via someone you direct connect to cannot be found via a regular LW search. Using Get More Results will help extend normal search results.

I'm surprised about the Private shared files. I have not used this process myself but guessed it should be the same principle to publicly shared files. ie: drag & drop the files or folders onto the Private Shared icon to share those privately.