After 1 year of bit.....g I might have to apologize since I think its not a bug but a really bad feature.
The current implantation lets you sort images in a library tree regardless of hierarchy. This might be nice if you have only about 20 images.
Reason for this feature is probably that when you drag a gallery widget to a page and select a library you can choose to include child libraries for display. As mentioned this feature does at the moment empower you to sort any way you want it.
However in real life clients might use nested libraries like this.
-> -> 2014
-> -> Event 2014 A
-> -> Event 2014 B
-> -> Event 2014 C
-> -> 2013
-> -> Event 2013 A
-> -> Event 2013 B
-> -> Event 2013 C
Now if he was to change the Order of Events -> 2014 -> Event 2014 A he/she would presented with all images. Which after a couple of years and number of images could make it really really hard.
I would assume that in most of the cases you would use nested libraries more to have an order in the backend.
Therefore I would prefer to have only the images of the current library to be sortable even when this means I would be losing the ability to sort images for a gallery regardless of hierarchy.