Yes, I went through all of the settings, and it was weird because I set up backup all pictures from the very beginning. One thing, that is also happening on Android, after an upgrade the app loses some or all the settings.

http://stackoverflow.com/questions/9420455/android-applicati...

This sometimes can cause surprises (for example setting back to highlights from full backup, to your point).

In my case it was simply missing pictures. It was reported by multiple users as well, Google had a ticket about it.