I have my sketches/projects organized in a folder hierarchy in my sketchbook location, for example...
Arduino
--led-projects-folder
------project-1-folder-> with matching .ino in folder
--ESP-projects
-----espnow
--------project-1-> with matching .ino in folder
--------project-2-> with matching .ino in folder
----ota-projects
--------project-1-> with matching .ino in folder
--------project-2-> with matching .ino in folder
But it looks like all the organizing folders are getting "stripped out", so I have tons of sketches showing up in each project folder. So in the example above I am not seeing a sub folder for espnow or ota-projects.
Not sure if this is the desired behavior (I imagine it is just not showing folders without .ino files directly in them), but it makes for an organization mess (at least for me
I am having the same problem. But it seems that the new IDE will allow only one level of sub-folders. Anything below gets mashed into one long list. I have lots of programs and snippets that I don't want to have to put outside the Sketchbook area and load with file/open every time.
If you have a GitHub account, you can subscribe to that issue to get notifications of any new developments related to this subject.
As a workaround, I can suggest the use of the "Sketchbook" view that opens in the side panel when you click the folder icon on the "Activity Bar" on the left side of the Arduino IDE 2.x menu. This "Sketchbook" view does correctly handle folder hierarchies in the sketchbook folder.