The Gallery shows a subdirectory, but clicking on the subdirectory shows an empty puzzle. Thus, subdirectories are not supported, so they should not be shown.
Not showing a subdirectory would work fine for NEXTGEN Gallery, because it creates a directory called "thumbs" for the thumbnails. Hiding the subdirectories is helpful in this case.
If browsing directories is supported, an option to disable that should be added. Notice that would have security problems, as you'll have to ensure that people can't wander into unwanted directories.