For cascading it is either or, it isnt cascading and parent child.. if you want to show the dropdown with subcategories you must select either single parent or if you want cascading just select single.
there are different ways to apply the category selector,
Cascading, drop down
radio buttons’ which are not for parent child
To show the children and whole subset make sure under the search panel, you have selected ” single dropdown” or single parent”
I changed my settings and checked both of those and saw all my parent child categories and the search worked