Ok, I answered my own question.
For anyone else out there wondering about something similar, all folders that contain apps MUST be on the same folder level, and on the initial deployment server, that MUST be /SPLUNK_HOME/etc/deployment-apps. What I had was three folders with the "apps" for my 1st tier (for example, SPLUNKHOME/etc/deployment-apps/App/default/whatev.conf), and then two folders, each with three "apps", for the other two tiers (so, for example, SPLUNKHOME/etc/deployment-apps/Tier2/App/default/whatev.conf). As soon as I moved ALL the folders out of those last two and up one level into /SPLUNKHOME/etc/deployment-apps and changed my serverclass.conf to reflect the new locations, everything started working. So it appears you can have tiered deployment, with automatic replication working thanks to the "reloadDSOnAppInstall = true" parameter as long as you don't ever nest your app directories.
Keep in mind also that the "apps" that need to be deployed to a client/server should be installed ONLY in the default directory, /SPLUNK_HOME/etc/apps, in order for "reloadDSOnAppInstall = true" to function. Use repositoryLocation on the client/servers' serverclass.conf to specify where its clients should get their content. DO NOT change the default installation directory by using targetRepositoryLocation or this won't work. I'm on Splunk 4.3.2, and I'm surprised Splunk hasn't fixed this one yet!
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