Freron MailMate

I just got the 1.7.2 upgrade. I decided to check out the new Gmail handling and it doesn't seem to work how it's described:

1) Added a fresh Gmail account with no user-specified labels (via adding a new IMAP account, unless there is some special way to add it that I missed)
2) The account showed up; All Mail is not subscribed as the 1.7.1 release notes suggest it should be (I didn't see that changed in the 1.7.2 release notes)
3) I do have a single tag defined in preferences, although no associated Gmail keyword (tag for IMAP \Deleted flag)
4) Created a new label in Gmail. Synchronized the account; the mailbox showed up in the account
5) Created a tag and specified the Gmail label name; saved it, synchronized and the label mailbox disappeared from the list
6) Tried creating a smart mailbox from that account with subfolders for each tag. I get \Seen and Other, but I do not get a subfolder for the label that I created

My understanding is that mailboxes should show up for each label, and All Mail should automatically be subscribed, except that anything showing up with a label will not be shown in All Mail. (I assume that a message with more than one label will show up in each corresponding mailbox).

Am I missing something, or is this not working as it's supposed to?