Base information

• Minecraft version: 1.12.2
• Mod version: 2.3.20.333
• Minecraft Forge version: 14.23.5.2821
• Mod Pack: (if applicable) direwolf20 1.12

dunno if its server or client/mod side issue so posted it here. also junk filter wont work if the blocks wont teleport to your inventory

I cant seem to reproduce this issue... I will have to load up DW20 to test it when i get time.

Just loaded up DW20 with all of your settings as stated above; everything works as intended.

Would you care to upload a video reproducing this issue? It might have to do with an item in your inventory that interferes/blocks/is incompatible with AOE mining, though I'd have no clue what item could do that.

Also do the items drop as actual items or as loot balls?

Not sure about OP's situation, but in my testing, it was actual items. Not until I get to a higher AOE (more items dropped) do I get the loot balls.