In it's current form, it's a bit of an all-or-nothing approach, which can become very cluttered and confusing.
If you want to try it out yourself, open
includes/functions_display.php
Find:
$subforums[$parent_id][$forum_id]['display'] = ($row['display_on_index']) ? true : false;
Replace with:
$subforums[$parent_id][$forum_id]['display'] = ($row['display_on_index'] && $parent_id == $row['parent_id']) ? true : false;