If you delete a custom group, any entries made to that group will still have the "custom" security set, but it won't be set to any particular group. The effect of this is that no one but you has permissions to view these entries; so even though they is not marked private, they are effectively private. Additionally, if you recreate the group with the same name, the entries will not automatically be set to that group again. If you would like to change the security level of the entry or set it to a new custom group, you'll have to go back and edit the entry (http://www.livejournal.com/support/faqbrowse.bml?faqid=2).
Change "is" to "are" and you're all set. :)