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On The Edublogs Forums bbPress Theme, I created a parent forum and checked 'Forum is Category'. I then added a child forum a level below the parent.
Everything looks fine in bbPress admin with the child forum indented below the parent forum as expected.
However, on the front-side, the list of forums on the left shows both parent and child forums at the same level. From the child forum, one can create new posts and comments. From the parent forum, clicking on 'Add New' does nothing.
So, the "Forum is Category" that I believe is supposed to be a container for child forums (correctly) doesn't allow new posts. However, it is displayed in a way that one would believe they should be able to post. Furthermore, there is no indication of any relationship between parent and child.
In the screenshot, "BestAgentBlogs Academy" is the parent and "QSBAB Discussions" is the child.