Ok so without going into a needlessly long discussion of how I sort my media library Ill just say this. All versions of PS3 media server 1.8.1 and higher for both windows and linux exhibit an issue accessing the #transcode folder when the media is nested greater than 5 levels deep. What I mean is that once you reach level 6 nesting selecting the #Transcode folder will indeed give you the list of files normally. However, once you attempt to select a file and get the transcoding options nothing will happen. I have verified this on several versions of PMS both on my Ubuntu based media server and using the windows version from my PC, and I tested this from several renderers. I tested with my XBMC-4-XBOX, Samsung BR player, and my PS3. In all cases folders nested deeper than 5 folders it is impossible to get the transcode options for any files.
I assume this is a bug with the way PMS operates, but I am unsure of exactly what is causing this. I also tested the media in question by adding a listing in the PMS root 1 level lower and suddenly I am able to access the #Transcode on all of the media which I was previously unable to access.