The things to note with the "Fit Node to Label" tool are that it (a) only takes into account the very first label of a node, (b) cannot make sense from HTML label text, and (c) does not apply to group nodes (but this may be obvious, since group nodes are designed to always entirely encompass their contents).
So, if, for example, you happen to use the "Entity with Attributes" node template from the "Entity Relationship" palette section all over your diagrams and expect the tool to adjust the node's width to one of the attribute labels, then this won't work, I'm afraid.