Just being a PASS rule doesn't explain why Diablo saw all traffic honor the L7. This says that all packets matched the L7. Doubtful.
I have the same problem trying to use the L7's. I add the FTP L7 to my floating FTP Wan out dst port 21 rule and all web traffic comes to a screeching halt. What an FTP rule has to do with HTTP traffic is beyond me. I have yet to find one explaination of how to use L7 Pass to Match. I set a tag (match) word on the pass rule and followed this rule with a "match to" and queue but doesn't work. With or without the dst port 21 in the second rule, same result.