By default Wordpress has robots.txt set as deny all even when privacy is set to allow all.

Add this to functions.php:- 

function custom_robots($output) {
	$public = get_option( 'blog_public' );
	if ( '0' != $public )
		return str_replace('Disallow:','Allow: /',$output);
}
add_filter('robots_txt','custom_robots');