Once I knew that you had it working all OK, I decided that it must be the way I'm doing things on my end!
So, I sat down tonight to see what was happening. I thought that by turning the option on it would display the 2nd level albums. WRONG!
I didn't realize that it was needing hard and fast photographs under the album, and of course, in my case there were none to show. (in a way it's a shame it doesn't work like album Icons, that digs down until it finds a photo to display)
I think were I went wrong was in the wording of the options. Enhanced Folders / Default folder icon which in my muddled brain translated to displaying 2nd level albums.
SO, very very sorry for what turned out to me wasting your time with a sprinkling of "operator error"!
BTW I used to work in development, if I hear "works on my machine" ever again ....
Nigel.