Yes, this appears to be a bug but except for the snippet I posted above (which works in a sense) there has been no remedy for this.
Using the code above, I as the admin at least now can see ALL users in the author drop down (in post editor) but what’s annoying is that it lists ALL users network wide, not just users on the given blog and it still doesn’t fix the issue for non-admin users. For now I have had to simply remove the author drop down in the post editors.
Thirdly, I cannot see the author drop downs in the quick edit feature in the post list at all. But at least I’m mostly there. Can other people who have had this issue pipe up here, cuz i know for a fact it’s not just me, I asked my friend who runs several WP multisites and he gets the same thing too.
Thanks.