Cant See More Than Two Levels Of Children In A Prefab

In the project tab I am having trouble with seeing the children components of a prefab if there are two levels of children. For example, Object One has a child object two, object two has a child. In the project tab on the prefab I can go to object two and it does not give me the drop down arrow to view the contents of the child. Is this a bug or am I not seeing something?

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Apparently it’s by design. More threads on the topic:

http://forum.unity3d.com/threads/37958-Children-of-Prefab-Children?highlight=prefab+children
http://forum.unity3d.com/threads/22228-prefab-goes-only-1-child-deep?highlight=prefab+children
http://forum.unity3d.com/threads/16424-More-Levels-for-Prefabs-in-the-Project-Pane!?highlight=prefab+children

I’ll admit I didn’t quite the follow the explanation given in the first thread I linked to (not saying it’s not valid - it just didn’t make immediate intuitive sense to me on first read). I find myself tweaking parameters directly in prefabs quite often, but I guess maybe you’re not supposed to do it this way (?). Also, I’m not completely clear on why if you were only going to display one child level, you wouldn’t just display no child levels at all. (It seems like that would be less confusing.)

But, I’ll admit I haven’t given it much thought, and I’m sure someone will come along and explain exactly why it’s that way, and why it should be that way. But, I’ll admit that (rightly or wrongly), I often find myself wishing that the full prefab hierarchy was displayed in the project pane.

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I fully agree with everyone that is complaining about this ‘feature’. It feels completely un-intuitive.

So what is the work around if there is any? I am considering to create only flat prefabs now…