All items are being included when No Folder selected. (MacOS version 2022.5.1)
It looks like this issue is being tracked by the dev team currently. Hopefully, it will be fixed in the next release.
Issue with the Mac App still happening, NO Folder is showing all items.
Appears to be ok in the iOS App and the Browser Extension
That’s the same release as the OP reported. The next release hasn’t hit the App Store yet.