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Don't know exactly what you are saying, but when I block and applied 3 damage to first group then that was prevented and the Lairwatch Giant did 5 damage to 2nd creature blocked, for a total of 8. Also, resolved that way when no damage was prevented, so creature is doing full damage to each creature blocked.

Yes, the full damage is an issue, but the fact that it is possible to damage others group than the 1st one is an improvement
I suspect first strike might be the cause, will further investigate

Of course it's possible to damage groups other than the first one, just don't assign all the damage to it.

Oh, I didn't know you could cancel the damage assignment, I got mislead by the Done button.
Then the full damage applied by first strike and double strike is the issue then, since their damage are applied automatically to the very next group if you skip first blocker (which also you shouldn't be able if not lethal damage is applied to 1st blocker but you can)so you can't assign damage to a 3, 4,... blocker.