It's not a simple fix. It's really a redesign of how the "All files' category works. Currently, "All files" is just a regular category there's nothing special about it, but in order to enable ALL files to be displayed when someone selects "All files' as the category, I forced the category to always be checked. It works fine ( albeit a little clunky ) if you leave "All files' as the first category. But since it's just a normal category, you can delete it, or rename it or reorder it, and doing so breaks it in all kinds of ways

In the upcoming release (scheduled for submission to the release process on or before Oct 31), I'm changing the way that functionality is handled. "All files" will not be a category at all and won't show up on your module settings page. There will be an additional setting (check box) that allows you to either include or exclude "All files'. If included, "All files' will be inserted into the category list and if selected will actually display ALL files regardless of the category(s) they are associated with. Which is how selecting "All files' should work. There will not be an "All files" checkbox on the item Upload/Edit form which I'm sure was confusing for the users.

I would suggest just waiting for the next release, 3.01.14 .. coming soon :)