You might try “Recount terms” and “Delete transients” at WooCommerce > System Status > Tools, but I am not hopeful for that.
You could try temporarily deactivating other plugins and switching to the default theme, to be able to rule out any conflict, but I am not hopeful for that either.
Your settings look good. I loaded up the plugin with only WooCommerce active. I got a bunch of errors showing, so I turned off error notices. Then I was unable to get the category display working at all, using the same settings as you. Its not practical to debug other authors’ plugin code.
You could try asking here:
https://www.ads-software.com/support/plugin/collapsing-categories
There doesn’t seem to be much action there, but there is a better chance that the plugin author will see your issue.
If you can’t live with it like it is, consider looking round for a similar plugin.