It's lack of knowledge of what credentials are/do combined with the fact that Google decided to put All in the menu and then repeat the All in the warning message.
Would be a whole lot simpler and less frightening if the option was "clear all user credentials" and the warning was "are you sure you want to clear all user credentials stored on the device and external storage."
I myself was extremely hesitant to use this tool due to the current language that lacks any differentiation between user/system credentials.
This is the exact fear that I'm talking about.
No, your phone shouldn't act up at all, unless of course you needed said credentials either in an enterprise environment in a "bring your own device" or a company issued phone situation. One other case is one in which you yourself have decided to either encrypt data, send/receive encrypted emails, or digitally sign documents using the device or digitally sign emails. Everything in the last case applies to the first two, but instead of being required by a company you choose to use the features on your own. These circumstances are the primary reason that KNOX exists, regardless of whether or not it's a "watered down," a full blown, or an implementation in between.
In the case of a company issued phone you shouldn't be able to disable anything or mess with credentials and certificates which are basically the same thing. Think of this as the same thing as logging into your computer at work.
In the BYOD case it all depends on the company as to what and what not you can change, although changing anything should prevent access to the network, smoke any encrypted company data on the phone in which a cred/cert combined with your password is required to decrypt/encrypt data, and prevent the encryption/decryption/digital signing of emails.
I won't get into the personal use as it's generally very tough to get working correctly between mobile devices unless everyone involved is using the same phone, the same family of phones, or unless everyone involved is using the same email app (IE the default email app found on later galaxy devices BUT NOT the gmail app) or apps that are compatible w/each other security wise. Although you can digitally sign emails to your hearts content.
POST NOT COMPLETE. MORE INFO AND A LINK OR TWO COMING
POST NOT COMPLETE. MORE INFO AND A LINK OR TWO COMING