I just created a mobile website with this wonderful tool and was very happy until i clicked Desktop version from the menu and started getting ...
"Incorrect usage of mobile Joomla" 
on both my android and iphone.
both of them had same error after clicking the option from the footer menu.

Also what i found that everytime I select all from the template menu if resets to none.

You shouldn't assign mobile templates to menus. Select the desktop template back if you have changed them so and go to Mobile Joomla settings and select the mobile template you want to use for each group of devices. Mobile Joomla will handle the template switching.