In Dolphin File Manager, Configure Dolphin, Grid Arrangement Columns looks OK until I check show in groups.

When I select show in groups, the entire content changes to a single column mode, which is absurd.

Can someone please explain how to overcome this problem.

I believe this behaviour is correct given the settings given. Would you prefer for items to take on a more row like form in this mode?

Yes, Just selecting Show in Groups options should not change them to single column, the icons can be arranged in to groups according to the given criteria, keeping the same format.. Just like what is presently happening with rows grid arrangement.

You need to file a feature request at bugs.kde.org in this case.

I actually added one just one hour ago