RYAN SMITH

As explained here: http://msdn.microsoft.com/en-in/library/gg334768.aspx

CRM online no longer requires you to use the list component in SharePoint for document integration. You can upgrade to this new feature called Server Side integration. The new server side integration no longer allows SharePoint folders/subfolders to be listed in CRM under Documents. Instead it only displays documents. Folders used to be available/viewable in the CRM document location when the list component was being used. Customers who upgrade to the new server side sync lose this functionality. This is a huge pain point for people who are accustomed to organizing their documents and having them displayed in CRM. Please re-add the ablitiy to display folders sub folders within CRM through the server side sharepoint integration mechanism as it was before with the list component. Or, please allow CRM customers who have upgraded to server side sharepoint integration to revert back to be able to use the list component.