You have a few options:
1. Add "All" to your data source before binding to the control. If the source is a DataTable, just insert a new row at the top of the DataTable, for instance.
2. Add a button to the LookupEdit's button collection (you might want to choose the "Delete" button so that it's an "X"). Handle the LookupEdit's ButtonClicked event, check to see if the user pressed the delete button, and set the LookupEdit's EditValue property null.
3. Handle the KeyDown event handler for your LookupEdit and set the EditValue to null if the user clicks the delete key.