The top navigation menu in SharePoint 2010 by default allows one level. If like me you had created the custom master page by copying over the controls from default v4.master page, the top navigation menu is controlled by the ASP menu control “TopNavigationMenuV4”. The number of levels of sub sites accessible in the top navigation menu is controlled by the “MaximumDynamicDisplayLevels” property of the menu control.
<SharePoint:AspMenu
ID=”TopNavigationMenuV4″
Runat=”server”
EnableViewState=”false”
DataSourceID=”topSiteMap”
AccessKey=”<%$Resources:wss,navigation_accesskey%>”
UseSimpleRendering=”true”
UseSeparateCss=”false”
Orientation=”Horizontal”
StaticDisplayLevels=”2″
MaximumDynamicDisplayLevels=”1″
SkipLinkText=””
CssClass=”s4-tn”/>