Install creates a notification object for all existing users. I'm not sure if executing that step will fix the issues being mentioned. I inherited the code and I'm not totally sure how all of it works. If anybody figures it out, please report back.
This plugin will not override email notifications it doesn't know about, and it's only programmed to know about some of the basic Elgg functionality. You could add additional overrides for other plugins or you can allow those plugins to notify as they would normally.
Dan, thanks for your input.
I'm not sure either if the problem is maybe with "user validation by email" plugin or what. If registration process is tied with "user validation by email" and notifications override does not include notification for it than that could be the problem.
Anyone knows if "user validation by email" is tied with registration process?