Hi Dave
It as working fine until either the upgrade to 3.1 or to the latest version of live search. I did them both at the same time so I can't tell you which one changed things.
... Stop the presses, I think you can blame me for this one. I checked it in Chrome, where I am logged in and the search results returned drafts. Then I thought I'd check it in a browser where I wasn't logged in so I used the Chrome Canary build. It runs as a separate process but it perhaps seems to share a cookie or 2 with the Mainstream version of Chrome. I'm not actually logged in in the Canary build. Odd
It behaves as expected in Internet Exploder (not logged in).
... ah, dammit, This just gets silly now. I'm thinkong of blaming WordPress at this stage. I tried it in Firefox, not logged in, and got all the drafts. Cleared all my cookies, got all the drafts. I cleared the active logins & restarted the browser - same thing. The page is cached and is the same html in Canary, Fireofx and IE8 so I dunno why IE doesn't work the same (ok, I do but it's not a nice thing to say).
I added the extra line from your first post and now it works fine, as expected. It shows me the drafts if I am logged in, which is kinda nice but was unexpected after I added the line to filter only published posts. I wonder if it's a regression bug in WordPress?
I was testing it by searching for "yellow" at cadbloke.com. Let me know if it returns anything because, if it does, they're all unpublished drafts, probably riddled with swearing.