Subgroup not updated by Thing with Switch channel added via Paper UI

if you have the following configuration

Group:Number:SUM         All           "All"                               [home-group]
Group:Number:SUM         AllSensors    "All Sensors"       (All)           [home-group]
Group:Number:SUM         MotionSensors "Motion Sensors"    (AllSensors)    [home-group]

Group:Switch:AND(ON, OFF)   FakeSensor               "Fake Sensor"   (MotionSensors) [thing]
Switch                      FakeSensor_sensorState   "State"         (FakeSensor)

So basically Group1 > Group2 > Group3 > Group4 > Switch
and you turn on the switch, all the above groups get updated.

states change from 0 > 0 > 1 > OFF > OFF to 1 > 1 > 0 > ON > ON

as you can see, Group3 behaves strangely imo. going from 1 to 0, should it not behave like the rest an start out at 0 and change to 1?

Now if you add a similar Switch by adding a thing to Group3 in Paper UI (e.g. a Sonos mute channel, which I used for testing), then Group3 does not even get updated:

states change from 0 > 0 > 0 > OFF > OFF to 1 > 1 > 0 > ON > ON

So the starting state is as expected, but it does not get updated as would be expected!
Only difference I can think of is that the Group created for the Thing does not have a baseItem or function associated with it, but still not sure how that would impact the behavior I am seeing.

Anyone have any ideas what might be causing this? is the behavior expected? anything you would approach differently?

JSON output from the REST calls for the All item in each state http://pastebin.com/61Cxvb3r