This sounds like the expected behavior.
The Navigator panel does not function the same as the Browse>Folder Path tree in the Organizer panel. In the Navigator panel, when you select "Open Folders and Subfolders replacing Contact Sheet" for a parent folder, Photo Mechanic combines the contents of the parent folder and the contents of all the sub-folders into one combined Contact Sheet tab.
If you try to open one of the sub-folders that exists in a combined Contact Sheet tab, for example the "Captures" or "Processed" folders in the screenshot, nothing will happen because the folder is already open in the active combined Contact Sheet tab.
If you have more than one Contact Sheet open in addition to the combined Contact Sheet tab, and the active Contact Sheet tab is open to some other folder, let's say the 2004-12-26 folder, and you try to open the "Captures" or "Processed" sub-folder in the 2004-12-30 parent folder, then Photo Mechanic will switch to the "2004-12-30" combined Contact Sheet tab.
You can use the Photo Mechanic Plus Organizer panel's Browse tab>Folder Path tree to single click on parent folder in the Active Catalog to see the contents of the parent folder combined with the contents of any sub-folders of the parent folder. You can select the triangle icon to the left of a parent folder name to expand it. Then you can single click on a sub-folder inside to view its contents.