Looks like the options should be disabled. However, I should point out the name is not a valid attribute for <optgroup> elements. Perhaps you should make that an id? Also, the <font> tag is superfluous, and they are deprecated, anyway. I would therefore suggest:
echo '<optgroup label="Disabled Names" id="disabledcluster">';
$down=disabled($pstatus);
foreach($down as $d){
echo '<option value="" disabled="disabled" style="color:#FF0000;">'.$d.'</option>';
}
echo "</optgroup>";
If that's still not working, try running it through the HTML validator to make sure some other mark-up error is not messing things up for you.