What does “reconciling all things” mean in Colossians 1:20?

   For God was pleased to have all his fullness dwell in him, and through him to reconcile to himself all things, whether things on earth or things in heaven, by making peace through his blood, shed on the cross.

   But now he has reconciled you by Christ’s physical body through death to present you holy in his sight, without blemish and free from accusation - if you continue in your faith, established and firm, and do not move from the hope held out in the gospel.

Though it appears that Paul contradicts himself in the span of a few verses, the first hermeneutic principle is the assumption that he doesn't and then reconciling our understanding to his statements.

"All" in the first passage does not speak of everything, since there are some things that will not be reconciled destined for destruction. So it must scope to all of the things which the Father gave him, and were separated from him for a time.

   Joh 10:29 My Father, which gave [them] me, is greater than all; and no [man] is able to pluck [them] out of my Father’s hand.

The second passage has two parts: A statement that his audience has been reconciled, and a clarification of who his intended audience is. Since his sheep will always be his sheep, the second part of the statement must be a clarification of who his sheep are rather than a requirement placed upon the sheep to remain sheep.