What you have described is a known limitation of using SMB File Transfer
with 0S/2 LAN Server versions 1.2 or later. Alternatives include using
third party products on the Macintosh such as MacLAN Connect from Miramar
to access the 0S/2 LAN Server. Otherwise, at this time you will be
required to limit directories to no more than 8 items.
For more information on MacLAN Connect, go to the Tech Info Library and
search under "Miramar".