Dropdown variable picker with sibling and child elements

We are trying to make a dropdown variable picker experience more user-friendly. In the current state, here's how it works.

The user sees a Parent database entity that is populated based on a previous step in a wizard. The user can then select Sibling entities by clicking on the target icon in their row, or children of the Parent by scrolling down the list (children are listed below siblings).

The user can also select nieces/nephews by clicking on the sibling names (or arrows) and selecting their children.

Two obvious UX problems we're seeing are that 1) users don't readily recognize the target icon as meaning "select this entity", even with a tooltip, and 2) the child entities are often getting buried under long lists of siblings. But we're also making the user have to remember the names of child items if they want to use search.

We are looking to keep a pattern that doesn't expose multiple separate dropdown menus through progressive disclosure (if this parent entity, show these children). Are there any good alternatives to explore?