1. Open the test file
2. Isolate the group
3. Select all
4. Ungroup — now you have just <Objects> as the last step of isolation
5. Click the leftmost group once with the Selection tool to make it the key
6. Press Horizontal Distribute Space button in Align panel Ai will treat the last group as if it is ungrouped — but it is not!

Why do I do this at all? To distribute all objects inside of a group.
I can’t do this when it is grouped, so I select it first, then isolate (to avoid interaction with anything else on canvas), then ungroup this larger group — because otherwise Ai won’t allow me to distribute, because all selected children = the group selected. So I want to ungroup, distribute and then group back... but the bug forces me to undo and exit the isolation. Not cool.