I'n not entirely sure if this is a fault or not, but here goes:
I have created a collection set with a number of collections inside in Lightroom.
I've then synced the collections and they are all visible in LRM on my iPad, but really i would like to see my collection set similar to a folder hierarchy.
Is this possible or is this correctly as it should be?
It's not a bug, it's a limitation of LR Mobile. Add your me-too vote and opinion to this feature request in the official Adobe feedback forum: Lightroom mobile: Ability to create Collection Sets for Photo Workflow Perfection | Photoshop Family Customer Community