In preferences > All, Playlist, you have
+ Display playlist tree > you want it on if you want a tree, or off if you want to flatten everything into a playlist
+ Subdirectory behavior > you're looking for "expand"
I agree with weirdaussie91, but my library is quite extensive. i.e., I have close to 1400 different artists, many of which have multiple albums associated with them. And after the folders are finally open, for gods sake don't sort through any category, because it will close all of the folders except the album current being played.
My playlist preferences were already set to: Display playlist tree [No check] and Subdirectory behavior [Expand]
I am a bit surprised that there isn't a work round option or plugin developed to address this situation as of yet. I have seen multiple posts over a number of years regarding playlist folder behavior. I remain hopeful that eventually, more sooner than later, that someone will develop an improvement. I love VLC and at this time, I don't want to switch to something else.