Virtual Navigation with more than 2 levels
Does Virtual Navigation can handle more than 2 levels with advanced configuration ?
Yes, you can use a hierarchical vocabulary in Studio. Note that when using more than two levels, there is no widget available by default to set this value on your documents. But you can follow instructions here: Create a n-level select widget
If you mean only XML then the answer is no. You'll have to write your own Seam component and xhtml template to handle your custom tree.