I couldn't find anything on that issue either, so I went and investigated it myself. I appears that while the sorting options have been removed from the application manager's UI in PR 1.2, it still looks at the config file if it's there. I solved it by deleting ~/.osso/hildon-application-manager This and the inability to rearrange icons in the menu are the only real issues I encountered. Rearranging icons is still a problem, not solved by removing the battery for a hard reset.