In case you guys are still having trouble, I thought I'd just post this as help:
In FSD options I recommend leaving the scan depth to 2 but choose the actual folder or parent folder in which the games are actually located. You can add multiple locations if you want, but increasing the scan depth will increase search time required by FSD before it displays your games (one of those Database things). Too much scan depth will slow down search time considerably.
So if you can, find all your 360 games and put them in one main folder on the root of your 360, say "Xbox 360" folder. Then create another folder for your Live Arcade games, another for Xbox games, etc. etc. Believe it or not, organizing your games will help your FSD respond better. Otherwise it's gonna scan through all those levels when it doesn't have to if you organize. My two cents