Okay, version 1.2 (which I have attached), allows you to select entire usergroups whose profiles will be hidden (from the groups you select from which to hide them), and allows you to select usergroups who will see a new link on the profile pages of users (not part of a hidden groups already) that will allow you to hide/unhide their profiles.
There is an external script you need to upload this time (it handles the hiding/unhiding from the clickable link).
If a user whose profile is being viewed is NOT a member of a usergroup that is hidden, and the browsing user is a member of a usergroup allowed to hide/unhide profiles, then if the profile being viewed is not hidden the following link will appear:
And if that user's profile is already part of the hidden list (by username), this link will appear:
Here are the settings for this updated version:
Enjoy!