My intended point is that browsing all is a viable way to find communities. You won't miss many communities if you browse everything. Then subscribe to what you like, block what you really dislike.
You're right that all can be overwhelming and distasteful, but at least it really is everything, as opposed to the r/all, which was heavily filtered.
I don't think it's just federation, I believe for posts to appear in your instance's All feed then at least someone on that instance needs to be subscribed to the associated community
It might end up showing all the communities but it won't show you every post. Like F1 posts rarely end up in all despite having an active community. You're more likely to see posts from formuladank than formula 1.