The current setup is supposed to be as follows:
If USB Type-C is used for Video input and USB Hub Source is set to Automatically select, then the Type-C is the Hub Source. If any other video input is used then the USB Hub Source is Type B.
If one device is Type-C (video) connected and the other is any of the other video inputs, your Hub Source changes - perfect. But if you use HDMI 1 and HDMI 2, or either HDMI and DP, the source is only Type-B - which can only connect to one of those devices. So, you lose KVM functionality immediately when connecting KB / Mouse / peripherals to the downstream ports (those on the side). - Regardless of which device is sending video signal the side ports remain connected to the one device that is connected to Type B port on the bottom.
But, if you can pick any upstream port (Type-C vs Type B on the bottom) as input regardless of where the video signal comes from, you can fix that above broken scenario - Type B upstream port connected to device 1 with video signal output to HDMI, and Type-C upstream port connected to device 2 with DP video out, KB / Mouse / peripheral in side ports, and bam! Instant KVM.
Now you can see why I got really really excited when they told me this was under consideration - it’s huge. Not only fixing what is currently not working as expected but expanding it in this way to really make it a powerful, usable feature for many use cases. I would start using this myself, as it would allow me to use my Logitech BRIO directly with whichever machine I have connected to my Spectrum, for example.
Obviously, there is still a limitation - we only have 2 upstream ports, so only sharing with 2 devices. But it’s still a lot more than we can do now.