Kris they never broke it, as far as I understand. They just didn’t fix it fully. Selecting all children in an isolation should not be treated as selecting the whole parent, not only Appearance-wise (which is now fixed), but for all other means, including Transform Each.
Another thing that behaves like this — try to isolate a group, select all and hide the selection. Ai hides the group, but I persoanlly expect it to hide only children, not the parent group.

I don't see your point. They tried to fix a different problem, and broke something else in the process. This is not expected, intuitive, or acceptable.

Kris, this is true, and, unfortunately, is expected :(
When all objects are selected in an isolated group, Ai treats the selection as the whole group.
There was a similar problem, when selecting all objects in an isolated group lead to treating is as a group in Appearance: https://illustrator.uservoice.com/forums/601447-illustrator-desktop-bugs/suggestions/34344712-selection-of-all-objects-inside-a-group-instead-se
It was fixed, and now only children get targeted when Cmd/Ctrl+A is pressed when isolated, not the parent...
...but it does not get applied to Transform Each :(

When two or more objects are grouped, and you go into Isolation Mode, you should be able to select each object and use Transform Each to transform each one independently of each other. What actually happens is the entire group gets transformed together, which defeats the purpose of going into Isolation Mode. Here's a video:

https://youtu.be/8XffvFBsbKQ

Selecting all children in an isolated group is treated as selecting the whole group in Illustrator, yeah. So the behavior OP describes, with 'the whole group transforming towards it's central point' is actually the whole group really doing that :/
...but at the same time, if we do select all the children the same way and alter the opacity — it gets applied to the children, not their group (which I think is correct, since I fought for this change)! So Ai should be consistent with it.

As for the sublayers, like in the Mait’s case...
It is weird. Sublayers are just nested layers. But Transform Each indeed treats them as objects, transforming each sublayer as if it was a group.

I think these are two different problems, but both are wicked.

It is about time to fix transform each command.
I have multiple layers divided to sublayers and 20 sublayers in total. Illustrator does not know how to scale all these objects separately and it is ridiculous. I have to scale them manually each sublayer twice. 40 times transform each. OMG!

Transform each is not definitely working correctly. Every sublayer is different object? Why?

It has always worked that way, atleast since cs5. Probably everbody hates it, but they don't bother changing it. So wierd.