In this application of the Euler-Lagrange equation, it is said that there is no $y$ in the function $\sqrt{1 + (y')^2}$. I see that the algorithm in progress treats $y'$ as unusually autonomous, as in the expression $\frac{\partial F}{\partial y'}$ but it still seems that it should count as an appearance of $y$ and also contribute to $\frac{\partial F}{\partial y}$. After all, an appearance of $\frac{1}{y}$, a binary operator with $y$ as an operand, would contribute to $\frac{\partial F}{\partial y}$. Why shouldn't a unary operator operating on $y$ contribute to $\frac{\partial F}{\partial y}$ (making $\frac{\partial F}{\partial y}$ nonzero in this case)?
To flesh this out, how should $\frac{\partial F}{\partial y}$ of a function such as $\sqrt{1 + (y^2)'}$ be interpreted?
See $\mathcal{L}:\mathbb{R}\times\mathbb{R}^n\times\mathbb{R}^n\to\mathbb{R}$ as a function with three arguments, say $t,u,p$ and $\mathcal{L}:(t,u,p)\mapsto\mathcal{L}(t,u,p)$. So when we write $\partial \mathcal{L}/\partial y$ we actually mean $\mathcal{L}$'s partial derivative with respect to its second argument, $u$. Note that this has nothing to do with what the other arguments are, we are simply saying the partial derivative of $\mathcal{L}$ with respect to its second argument.
I agree that the notation you have mentioned is a little messy and I have seen people using $\partial \mathcal{L}/\partial u$, $\partial \mathcal{L}/\partial p$ (e.g. Jurgen Jost's book on Calculus of Variations) to denote partial derivatives with respect to the second and third arguments of the Lagrangian.