You have created a Data View webpart which displays items in your document library.
But hold on.... why are items only appearing at the root folder level? All items in subfolders are missing?
Well, either you could use SharePoint designer to change the scope. Personally I would not recommend using this approach as SharePoint Designer is known to corrupt pages with data view web parts once you hit the save button.
Or you could go down to the lowest level, e.g. export out your webpart and altering the code, and then re-upload and add it as a new webpart.
All you need to do is to add one more attribute to the Data Source properties.
Open the .webpart file you downloaded in plain text.
Locate the property called DataSourcesString.
Here you will see the CAML query to retrieve data from your document library.
Locate the sharepoint:SPDataSource node within the property.
It should look similar to this:
<sharepoint:SPDataSource runat="server" DataSourceMode="List" SelectCommand="THE CAML QUERY" UpdateCommand="" InsertCommand="" DeleteCommand="" UseInternalName="True" UseServerDataFormat="True" Scope="Recursive" ID="dataformwebpart3">...some other stuff here...
</sharepoint:SPDataSource>
Add in the highlighted text. Now all items in folders, or at root level will appear in the same flat view.
