Bone Falloff not working? I'm using version 2.68a

I've created a face mesh and now I'm trying to setup some bones to create expressions. So far I have added one bone and parented it to the mesh as "envelope weight". 

However the envelope falloff is not working, as all the vertices within the bone envelope move/rotate at the same rate.

I remember working with an older version of Blender a couple years back and bone envelope falloff would work fine. I don't remember the version # though.

Is anyone aware of this, is there a solution or a version where this is confirmed to work? 
Thanks!!!
I too am curious about the proper use of bone envelope in Blender too. The falloff appears to not be functioning correctly. This may be a bug. As you say it used to work, so something may have changed that stopped the falloff from working as desired.
I just double checked and what we are calling falloff is called 'distance'. I don't know if this name changed. I submit a bug report and see what happens.

Update: I have submitted a bug report and referenced this post, provided Blender files I used to test this too. It is definitely a bug, as the blender manual states the following: "The outside area, materialized by the lighter part around the bone, and controlled by the Distance setting. Inside this zone, the geometry is less and less affected by the bone as it goes away by following a quadratic decay." The quadratic decay appears to be what has failed.
https://www.blender.org/manual/rigging/armatures/skinning/obdata.html#bone-deform-options

Bug report: https://developer.blender.org/T50392