Override not working

I couldn't get overriding theme_latest_members() to work.
I am rather new to drupal, but after looking at the module source, my guess was that this was because
latest_members_block calls it explicitly in line 36 of your source.

I renamed the call there to mytheme_latest_members, and then the override in my template.php worked.
It's a bit pointless this way though, as i might just as well have modified the code of the function itself.