Doesn't the code I posted do exactly that with only one pass? I didn't add the display file bit, but that's trivial to add if you need it.

Here's the output of my code run on my junk directory, it seems to do what you ask :)

  +-dbf
  +-palindrome
  +-plot
  +-rules
  |  +-abc1
  |  |  +-ba
  |  |  +-de
  |  |  +-te
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