There are two problems. The first, most obvious one is that of clutter (not to say spam). The more public updates are in your feed, the less space there is for

There are two problems. The first, most obvious one is that of clutter (not to say spam). The more public updates are in your feed, the less space there is for your personal - and more important - ones. Granted, there are solutions to this problem (groups), but how many people are even able to use them? The second, more subtle - but more fundamental IMHO - one is that of Facebook's brand. If this succeeds, it will inevitably be diluted. In the long run, this could open the space to some competitor who focuses completely on the private space. This is difficult due to network effects, but not at all impossible.