Need a Views2 recipe: Display all terms/nodes in a vocab

A node view grouped by a taxonomy term field (click the gear icon doodad next to "style" to make the view grouped) will accomplish this for a flat grouping.

I'm still looking for a solution for nested groupings, where a term is a subgroup under its parent, e.g.:

Places (vocabulary)
- World (term)
- - Node
- - North America (term)
- - - Node
- - - Node
- - - United States (term)
- - - - Node
- - - Mexico (term)
- - - - Node
- - - - Node
- - - Canada (term)
- - - - Node
- - South America (term)
- - - Node
- - - Brazil (term)
- - - - Node
- - - - Node
etc.

I'm also looking for similar functionality outside of taxonomy hierarchies, actually (for example, grouping items first by "Location" and then by "Color" within each Location).
I did this in Views 1 with a phptemplate override that manually sorted my list view into nested groups and subgroups, but my code was inefficient and ugly.

It probably requires creating a custom style template or plugin for the view.

Edit: here's the relevant section of views_plugin_style.inc:

  function options_form(&$form, &$form_state) {
    // Only fields-based views can handle grouping.  Style plugins can also exclude
    // themselves from being groupable by setting their "use grouping" definiton
    // key to FALSE.
    // @TODO: Document "uses grouping" in docs.php when docs.php is written.
    if ($this->uses_fields() && $this->definition['uses grouping']) {
      $options = array('' => t('<None>'));
      foreach ($this->display->handler->get_handlers('field') as $field => $handler) {

        if ($label = $handler->label()) {
          $options[$field] = $label;
        }
        else {
          $options[$field] = $handler->ui_name();
        }
      }

      // If there are no fields, we can't group on them.
      if (count($options) > 1) {
        $form['grouping'] = array(
          '#type' => 'select',
          '#title' => t('Grouping field'),
          '#options' => $options,
          '#default_value' => $this->options['grouping'],
          '#description' => t('You may optionally specify a field by which to group the records. Leave blank to not group.'),
        );
      }
    }
  }

So, it looks like grouping based on a single field only is assumed at that level, before it even looks at style templates. I'm not sure how to expand the functionality to allow nested groupings.

Edit: here's the function that does the actual grouping.

  /**
   * Group records as needed for rendering.
   *
   * @param $records
   *   An array of records from the view to group.
   * @param $grouping_field
   *   The field id on which to group.  If empty, the result set will be given
   *   a single group with an empty string as a label.
   * @return
   *   The grouped record set.
   */
 function render_grouping($records, $grouping_field = '') {
    $sets = array();
    if ($grouping_field) {
      foreach ($records as $row) {
        $grouping = '';
        // Group on the rendered version of the field, not the raw.  That way,
        // we can control any special formatting of the grouping field through
        // the admin or theme layer or anywhere else we'd like.
        if (isset($this->view->field[$grouping_field])) {
          $grouping = $this->view->field[$grouping_field]->theme($row);
          if ($this->view->field[$grouping_field]->options['label']) {
            $grouping = $this->view->field[$grouping_field]->options['label'] . ': ' . $grouping;
          }
        }
        $sets[$grouping][] = $row;
      }
    }
    else {
      // Create a single group with an empty grouping field.
      $sets[''] = $records;
    }
    return $sets;
  }