The VI hierarchy window is fairly useless. For large projects, it is painfully slow to update. The links between objects don't make the architecture of a project any clearer. It cannot be printed with high resolution as a PNG or PDF file. Etc.
Ignoring these shortcomings, it appears to not behave as expected: when selecting View>>Always Show Labels, collapsed library boxes expand laterally as if to accommodate the library label, but no label is displayed. I am labeling this as a bug, but maybe it isn't.
Similarly, a library is represented by said box with an icon inside. The icon seems to be picked up randomly from one of the VIs in the library. This is not helpful. There should be a way to set a "library" icon (not just a template as defined in the library "Properties" window.
Tested in Windows LV 2021 SP1 64 bit