| The latency is actually the same whether you traverse the public or private network because either way it won't get routed out to the edge and back.
the latency will be similar in un-congested conditions (it will stay inside the network edge) but private networks allow the switched network to broadcast less, allowing it to handle "more" traffic across switch backplanes and area networks.
Well, the nature of routing is such that, for communication between two VPS in a given datacenter, the traffic wouldn't really "go over the internet", but it ought to still help to have the internal traffic separated from the public side.