You are correct, there appears to be an issue with this feature.
GM flagged accounts and/or GM clients filter the /who list slightly different. So while this feature is working perfectly for GM's, that really doesn't do you any good does it?
I'll get it fixed tomorrow, but it will probably be sometime next week before it makes it live via hotfix.
LINK
(Rothgar) Re:RE: "/who all guild" and what it means that it doesn't work as described
