To use the workspace iterator you must put all your gdb under the same root folder. Set the input workspace to be that root folder and workspace type = FILEGDB, also check the recursive option.
If you don't set the workspace type to any thing (leave it blank) and just check the recursive option it will run through each folder and each gdb. You will then have to add a logic which checks if it is a folder or a gdb and then branch your model based on it. It would be a round about way.
It would be easier to put all gdb under one root folder and iterate.