I followed this article and it works fine if the number of items for a letter is less than 30.
But it fails when you have more than 30 items and go back and forth for a group. Say Under "S" you have 70 items (and it set to show 30 items per page), then when you click on next the grouping still fine. However, when you go back to 1-30 (the first page) all items starts with "A" shows up under "S". {may there is a bug in SharePoint 2010?}