Dynamite deals damage to all mobs and items. Damage to items simply reduces the number of items there. As for it only damaging you sometimes, my guess is it was either just a very weak dynamite and you didn't notice, or most if not all the enemies had magic shield, which negates all damage taken and then breaks (more magic shield protects against more attacks). As for the stones, when you collect them, the stones deal damage equal to the number of stones you picked up to a random enemy. So picking up four stones deals four damage to a random enemy.