I think that it may be broken for Rotondo and Badspot. At least, they appear in the list, but if you view their profile, they appear offline. This was what I observed over the past few week, though. Is this accurate?
I think it's probably a seperate system from the "Do not appear online" button, like a "Moderators don't appear online" option, but yeah, that's true.
Neither Badspot nor Rotondo appear online according to their profile page, but if online they will appear on the active user list.
I can't recall exactly, but I believe the same was/is true for Ephialtes and Kompressor, so I think it's a Moderator option.