"All My Files" in Finder of Lion has stopped working.
I suspect that this has happened after installing Path Finder 5.7.8.
I suspect you are correct regarding Path Finder being the culprit :). Cocoatech's Path Finder Changelog lists this in it's most recent version (5.8.8):
Fixed All Files search item in Lion and other saved searches.
Updating Path Finder should resolve this issue.