I don't have xRC experience to be of much help on this question. If it's still an issue for you and we're not getting any responses from other user's you might consider opening a service request at supportnet.mentor.com
I had another thought... if your data getting is getting flattened during LVS it might be the reason for your flat results from xRC.
Hi. To run a hierarchical extraction, you have to select hierarchical, which you did, but you also need to specify an hcell file. It defaults to the name hcells, but this might be an empty file. You need to fill it with the actual cell names that you want hierarchically extracted.