Very cool. I'm not an AMZN or AWS fanboy, but this is really neat stuff, and very impressive how much they continue to increase their market lead.
If you have Droplets with private networking you can communicate within that data center but other Droplets in the data center could still eavesdrop on your packets. To feel secure you need to encrypt data that goes between your droplets.
As for iptables: if you don't need a port open, don't open it.