Thanks for explaining how you expect Show All Notes to behave: what you’re expecting seems reasonable, it’s just not how it’s currently designed.
Each device currently remembers which notes were visible in each perspective’s task list, and “Show All Notes” is currently implemented as an action which shows all currently visible notes. But the ways this was designed was to remember the current state of those tasks (and whether their notes were shown), not whether we’re in a “Show All Notes” mode or not. So any new notes that show up later always start out hidden. (We used to have a hidden setting which would make all notes visible by default, but that wasn’t really the right design either: it was just picking a different misbehavior.)
But I think it would be relatively straightforward to make this behave the way you propose, by turning Show All Notes into a view state rather than an action. I’ll look into that!