Clark: I'm not sure what I would want, but what is there doesn't seem to make sense?
Off the top of my head, I usually don't have subfolders in my projects and I would want to be able to uncheck the "show subfolders" and have all of my files directly under "Source files" with no hierarchy. This is the way I'm used to working.
For the case of "show subfolders" I don't normally work that way so don't have much to say except that it doesn't seem to make sense to have the subfolders and "Source Files".