Using the JTOpen(AS/400) driver.  In the Alias properties, Driver Properties tab, I have checked "Use driver properties", selected "libraries" and provided the library list (multiple libraries separated by commas, no spaces).  Also, selected "naming" and chose "system".

The connection URL is jdbc:as400://MERCURY/DANLIB

When I attempt to run a simple "select * from policys" where "policys" is a table in a library found in the library list (but not library DANLIB), I get:
  Error: [SQL0204] POLICYS in DANLIB type *FILE not found.

When I qualify the table name (i.e., "select * from pmsprod/policys"), the query runs successfully.

Another interesting thing I noticed.  When typing the statement with the unqualified table name, I notice that the table name appears in red until I type the final character, when it turns green.  It appears to show me that it found the table in the library list.

I am qualifying all of my tables for now, but this is a major usability issue for me.  I really want to use the library list I set in the alias properties.  I've been playing around with various settings, trying to get this to work.  Searched online with no success.  (BTW, can someone show me how to search the archives of this list?)