This issue has now been resolved, and it appears to be a combination of user error (on my part) and a slightly confusing interface. It turns out, even though something spins when you tick the All Below option, the number of people below in the hierarchy doesn't get updated until the changes are saved. Because I had ticked the box and the number hadn't changed, I never bothered to press Save, and therefore never discovered that the feature does work!

Thanks to Synergy, our Totara partner, for excellent support (and putting up with this sort of question with good humour!)