5
Yes, like irmtfan suggested, you should read that FAQ to fix the problem you are having.
The reason it doesnt seem to work is if users are already signed up (including you or admin), then their display mode is already set in the user profile, with whatever WAS the default comment mode.
So you need to update all users who you want set to flat by setting their umode to 'flat' in the xoops_user table of the database.
Hope it helps.