I also dislike this idiom, but not because it means the opposite of what it suggests. Rather, I dislike this idiom for the same reason I dislike saying "everything except" in its place; both expressions are vague.

What I mean by this is that, while saying that an army was "all but" wiped out certainly CAN mean that everything was done short of wiping it out, another grammatically correct way to interpret those words is to assume that you also tried giving the army puppies, letting them go, etc.

So it is vague in the sense that it can both nearly mean the opposite of what is intended and also something very close to what is intended. However, most English speakers have accepted that the idiom means only one of those two possible things.

The reason this frustrates me is that many idioms are not ambiguous. Ambiguity is the death of language. It is important that people know what we mean when we say what we say, and the "all but" idiom lacks context for making its meaning clear.

This is particularly important for people who do not speak English as their native language. For those people, it's important to have idioms have a reasonable explanation as how to they gained their meaning. For "all but", however, it seems the choice of what it means was simply arbitrary. It could be used to mean one of two things, and one way was used more often than another, so that became the meaning. But it still has another possible, literal meaning, leading to the ambiguity if one is unfamiliar with the generalized decision due to years of forming the modern vernacular.