The PubSubEngine class seems like it lacks support for the member affiliation in the modifyNodeAffiliations method. With the way the code is structured now, if the affiliation is not owner, publisher, or none it defaults to outcast. It is also not clear that this method actually saves changes back to the db. Please find a patch included with this report which resolves this problem. Being new to this code it is not totally clear that this is the right approach, but it does solve the problem. Also, find attached a set of XML stanzas which allow you to reproduce the problem.
See section 4.5 (whitelist) in XEP-0060 for background.