I don't think that Link Library was designed to work with the Hierarchical Links plug-in. However, I've achieved a hierarchical structure by using multiple libraries. You can see it in operation at this link. For a category that has subcategories, check out this link.
The basic structure is described below. For purposes of my examples, let's assume you want to have top-level categories of category1, category 2, etc. Then below category1, you want to have category1a, category1b, etc. You want your main page to be called linkspage.
You set up Library 1 to contain all top-level categories (category1, category2, etc.). Switching Method is HTML Get+Permalinks. Do not check the Enable Permalinks option. However, do put linkspage as "Permalinks Page."
The code for the linkspage page is then:
You then set up Library 2 that includes category1, category1a, category1b, etc. You check the box for "Only show one category at a time," and select the number ID for category1 as the "Default category to be shown when only showing one at a time (numeric ID)."
You then create a subpage of linkspage that is linkspage/category1. (To make this work, the slug for the page must be the same as the slug for the main category.) The code for linkspage/category1 is:
Repeat Step 2 for each of category2, category3, etc.
The categories on your main (linkspage) page will now link to each of your subpages. And each of your subpages will now show the main category initially, but allow the viewer to choose to see a subcategory.