Keyboard Maestro Beats System Preferences
As you have no doubt guessed by now, Yosemite didn’t erase the annoyance. Nor did El Capitan or Sierra. Today, after running into the problem once again, I decided to take matters into my own hands. I turned off that shortcut in System Preferences and built a Keyboard Maestro macro to do the job.
Custom keyboard shortcuts have been buggy for me, too, especially in Sierra.
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Cmd+F3 does this (actually, that would be Cmd+Expose Shortcut Key).
Another neat tip is that if you use Cmd+F3, as described here, you can do so in two ways
1. Tap the keyboard combo to show desktop, then tap it again to restore windows (or hit Esc)
or
2. Press and hold Cmd+F3 to only hide the desktop for as long as the keys are held down. When you release the windows will slide back into view again.
#2 above works for most of the shortcut keys at the top of the keyboard – you can tap 'em, or you can hold them down.