I do not think that Yang is right. What happens is that the tree viewer that is being deployed is HTML, and it includes JavaScript. IE presents XML as colored, legible HTML, and the extension / anti-aliasing code is implemented in JavaScript. IE then refers to the default security policy, which prevents it from executing JS in files opened from the local file system, and this gives you a warning about how "this web page" is limited to running scripts.
You can verify this by noting that if you did not select "Allow Blocked Content", then there will be no expand / collapse. If you enable scripting, expand / collapse will start working.
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