When variant url is selected in the display template all the variants are shown in the product list under a category in BO. If each product has many variants the list becomes a mess. It is better to have a setting for pim to override this listing logic so that the only products are shown under the categories even if the variant url is selected in the display template.
Bump*
We need to pump this one and add the same functionality as now exists in the search, where you can toggle between Products and Variants views. It's not very usable right now when working with categories and you have hundreds of variants planned for that category.