In Netscape 4.78, changing the security box to "Custom" does not cause the custom friends groups to appear.
The form uses an onChange event handler with document.getElementID to display the friends groups when you select Custom. the getElementID function is not supported by Netscape 4.x (or, I suppose, other browsers that do not support the DOM).
For the record, many older systems and linux/*nix systems are still running Netscape 4.78, which was the bundled browser with Redhat 6, I believe.
Should this go into Zilla? Does LiveJournal want to continue to support older browsers in the web client? I couldn't find "system requirements" for the web client, so I wasn't sure what the expectations were for a system using the web client.
I apologize if this isn't the right place to post this. If it's not, please let me know where I should post it.
Thanks for your time and help with this matter, which was discovered by a support volunteer who posted it to the Support Board (here).