Is there an easy way to make a file within Downloads private? Something like a radio button that toggles the ability to see a Downloads entry.

Privacy on = seen by just the user that uploaded the file.

Privacy off = seen by the entire community.

I don't think this is possible the way you envision within IP.Downloads as it stands.  

Two other options:

1. You make an entire category only visible to the membergroup of your choice.  That's what I do when I need to 'prep' my files before I release them to my members.

2. If it's an admin who wants to view or not view, you can maybe use the Hide / Unhide moderator control.  

IP.Downloads doesn't have the same privacy considerations as IP.Gallery, where you can make an image only visible to the user (and even those are very sparse controls).