It doesn't explain the connecting/disconnecting issue, but I believe you are probably referring to Illustrator 8 (late nineties) or even older versions.
Illustrator 8 was the last version that had only main layers in the Layers palette (sublayers were introduced in Illustrator 9). Also, as far as I remember, in Illustrator 8 no detailed object listing was displayed in the Layers palette.
So, this may at least explain your confusion about how layers are structured nowadays.
You can, by the way, turn on the "Show Layers Only" option in the panel options of the Layers panel.
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