For those who run into this in the future, the issue was due to pagination and the parent appearing on a different page than the children. Removing pagination from the View All menu fixed the nesting.
There is a ticket opened 7 years ago reporting this bug and it has yet to be resolved. In the comments user danburzo suggests adding the following filter, which corrected the issue for me.
<?php
add_filter( 'nav_menu_meta_box_object', array( $this, 'disable_pagination_in_menu_meta_box' ) );
function disable_pagination_in_menu_meta_box($obj) {
$obj->_default_query = array(
'posts_per_page' => -1
);
return $obj;
}
?>