In a combat involving several 1 and 2 step units, do all 2 step units have to take a loss before any one step units take hits
I don't read the rule that way.
It says that, if the owning player has a choice, a one-step unit can take a step loss before a two-step unit takes a step loss.
It doesn't say that all units must take a step loss before any unit is removed from play.
Put those one-step scrubs up front and let them die first.