I recently upgraded to vRO 7 (an in-place upgrade from 6.0.2). I have a customized "clone vm" workflow that had the user select the vmFolder, the Cluster, the Resource Pool, and the Storage Cluster from the tree - starting at a specified root object. This allowed them to drill down and find what they were looking for in the inventory. Now, when they click on the "Not Set" link, a search box appears. You can hit enter and it will present the full list of object under the root object but it is a flat list. And for selection of the Resource Pool, this gets a little complicated as every cluster has a Resources. I tried adding Select Value As - Tree but the behavior was the same. I try the same thing on a clean installation of vRO 7 and the same workflow functions as expected - it pulls up a tree for these inputs.
'Select value as tree' will be ignored if for some reason the vRO decides that a certain plug-in type, in this case Resource Pool, is not an inventory type.
Unfortunately, it is a bit hard to troubleshoot such issues remotely. I'd suggest to start with the following: