I dug a bit deeper, and it turns out I was setting the default group on the default detail (which seems to only apply to dynamic groups, etc.) Instead I did the following and thus set the default group configuration per detail and detail-detail level:
<xcdg:DataGridControl>
<xcdg:DataGridControl.DetailConfigurations>
<xcdg:DetailConfiguration x:Name="d1">
<xcdg:DetailConfiguration.DefaultGroupConfiguration>
<xcdg:GroupConfiguration InitiallyExpanded="False" />
</xcdg:DetailConfiguration.DefaultGroupConfiguration>
</xcdg:DetailConfiguration>
<xcdg:DetailConfiguration x:Name="d2">
<xcdg:DetailConfiguration.DetailConfigurations>
<xcdg:DetailConfiguration x:Name="d2.1">
<xcdg:DetailConfiguration.DefaultGroupConfiguration>
<xcdg:GroupConfiguration InitiallyExpanded="False" />
</xcdg:DetailConfiguration.DefaultGroupConfiguration>
</xcdg:DetailConfiguration>
</xcdg:DetailConfiguration.DetailConfigurations>
</xcdg:DetailConfiguration>
</xcdg:DataGridControl.DetailConfigurations>
</xcdg:DataGridControl>
Everything is working as expected. Thanks!