Sorry for the strange title, trying to wrap my mind on how to word it.
My Situation:
I have an "ALL" category and several child categories
If I tell Wordpress to show Blog Posts from Category 1, the blogs populate as they should. If I tell it show Blog Posts from the parent category "ALL", nothing happens. I get "No posts found."
What am I missing?
What you you are trying to achieve is not really possible via your current method.
Of course nothing shows because there is no such post with the "ALL" category tied to it.
In order for it to show as stands you need to link the "ALL" category to each post.
To filter via all selection without the ALL category you will need to add some code that runs and shows all post (when ALL is selected).
I suggest you check out this link https://wordpress.org/support/topic/show-categories-filter-on-custom-post-type-list
Building your own filter rather than relying on categories to filter is what you are looking for.
