I first started really working with Simple Links in WP 3.5RC1, and never ran info this bug. I now am on RC3 on that server, and I can edit (or quick-edit) the Link subcategory and every subcategory displays fine on the Link Categories page. But, on my 3.4.2 WP install, when I edit a link subcategory, or even just reload the Link Categories page, it then disappears from the list. I looked through the mysql tables and everything looks right.
Oddly enough, on the Link Categories page, the pull-down select menu correctly shows all subcategories, nested underneath the parent categories in the menu. Also, the category items count is accurate and is counting the “invisible” subcategories. When I go in to edit the subcategory, the pull-down select menu is has the parent category properly selected.
Also, when I am adding a new link, the “Link Categories” box on the right side correctly shows all of the subcategories underneath the proper parent category.