I am assuming that you stopped the c# app and then restarted it? if this is an embedded report, it will need to be recompiled, even if it is loaded dynamically, I might still be leary. I am also assuming that you saved the report...silly things, but I have goofed on them before.
No, record selection formula (Report/Selection Formulas/Records) works in reports. I haven't used it in a while (I have the app call a stored proc and then I set the report datasource to this dataset, so the report only sees valid records to begin with), but I have never used the group selection (I was told not to by the person who trained me...he had worked for Seagate as CR tech support), so I doubt that it is that.
It is probably something else....just don't know at this time.
I am also assuming that you are joining directly to the tables in the report, otherwise, you wouldn't need to filter.