Although a smart folder or smart group appears similar to the icon convention used for folders or groups used for organization or files or documents, there’s a significant difference.
Smart folders or smart groups do not hold files or documents. They are instead search criteria that display a list of items that meet the criteria, when opened. The listed search results are not “located” within the smart folder or smart group.( While you can select a smart group and search “within” it in the Toolbar query of DEVONthink, smart groups are not selectable for searches in the full Search window.) In DEVONthink 2.x you can select a smart group for search in the Toolbar query, but cannot search for a tag; in the full Search window you can search fir a tag, but not “in” a smart group.
Your concept of a hierarchical smart folder or smart group gets tricky, because the files or documents to be included in the subfolders or subgroups are not really located at the top level of the hierarchy (or in a subfolder or subgroup), but instead represent a new search of the search results listed in the top level, but with one or more added filters. To implement that in the smart group editor would add complexity.
I usually create smart groups from the full Search window, when I’m satisfied with the results of a search and want to turn it into a smart group. All I need do is click on the “+” button to the right of the query field, then name and save the new smart group. Very easy!
Operationally, as in your case, if I see that the initial search criteria are too general to isolate a set of results that would be useful to me, I won’t yet create a new smart group. Instead, I’ll refine the search. In your example, I might add a new Tag filter by clicking on the Advanced button and creating a search for items tagged yellow (create new smart group) and another for items tagged green (light), creating a new smart group. Or perhaps instead a search for items that meet the original criteria plus a tag of yellow OR green (light) and turn that into a smart group. Not hierarchical, but not complex.
Or I might select all the initial search results that were too general, replicate them to an empty group, then search that group using different criteria, such as tags, etc. This approach doesn’t result in a true smart group, as it doesn’t properly accommodate new or revised items, but can be useful for additional “slicing and dicing” of existing database content.