I'm sorry but the whole concept of a private cloud makes no sense to me - why would you have a private electricity generator for your home? The security issues are a lot of fear, uncertainty and doubt (FUD), I have written about it here: http://rakkhi.blogspot.com/2010/07/cloud-computing-security-...
It's only FUD if you don't consider physical security at all important. When you're working with VERY sensitive data (the kind that mishandling could literally get you arrested for), you seek to secure it in every way possible. Perhaps ironically, a white-listed firewall rule for a cluster of EC2 instances is probably more secure than most government networks, but putting it anywhere that compromises physical securit…
But of course do a risk assessment, maybe military data should not be on any sort of cloud. But I know internal government and military security is actually pretty poor - funnily enough generals care more making sure their comms work to their soldiers than whether it is encrypted - sound kind of like a business eh?
Either way I predict that within 5 years, private clouds will be a thing of the past