If you want a feature, ask for it on the Gitlab, don’t wait for others.
Personally I don’t care, I don’t use that mode. I think it is better to be as is by default, but I also agree it could have better terminology or maybe an information popup when you enable/disable it (I also suggested the popup idea for the AUR setting when people blamed Manjaro to not warn enough the users about the implication of using the AUR, when in reality the WIKI article is clear about that, and there is already a warning message under the option when you go to enable it, I thought a popup that people need to read (maybe with a link to the WIKI article and/or this thread) and click Accept was a good idea.
Having the Software Mode by default makes it clearer for people, when they search for an application they do not get dozens or hundred of packages/libraries/whatever, they only have the actual programs listed. If you need to install something like a library manually then I guess you’re already someone that would probably use the terminal for that anyway, or you wouldn’t have the mode enabled in Pamac (you once in your system lifetime unticked the option, not the end of the world).
But about the terminology, I think it could be improved yeah, maybe with something like Only show applications so that if you can’t find something and you see that option, you probably will understand right away that it is the culprit, even on first time usage of Pamac.