It can do both. As indicated, all'y'all is optional and probably falling out of fashion. While I'll use y'all in almost any sentence, I'll only pop out an all'y'all when adopting speech patterns around other native speakers.

When we are in foreign Romance language countries and guesting with people, we always teach them how to say hello in Texan. Once, in a farmhouse in Burgundy, I was eating dinner with a farmer and his wife. A simple meal of eggs stewed in wine, bread, and cheese. The conversation, in French, turned to speaking some English, and we offered to teach them how to say "Bonjour" in Texan. We taught them "Howdy, y'all." The elderly farmer sat back in his chair stroking his chin, then in a perfect country drawl repeated it back to us, sounding like a native Texan. We decided all farmers must have the same accent worldwide. EDIT: In fact, what most surprised us was that he nailed the initial H sound, something most people in France we encountered had trouble with.

We continued the conversation and said that in Texan, like French, there's a plural second person form equivalent to vous that we sometimes use, and it's all'y'all.