Sidebar/favorites severely downgraded in Safari 26

Edited to add: I'm on macOS 26.1 (Tahoe), and Safari 26.1

I think I may have had a similar frustration and recently solved it. At the top of the Bookmarks menu, if you click the 3-dot menu, you can change your preferences. It's odd that this isn't something accessible to change in the Safari settings menu.

Screenshot of the 3-dot menu to the right of Bookmarks when you expand the sidebar

Screenshot of what the 3-dot menu is. I changed to compact and turned off Folders on Top and got back close to my previous view. Hope this helps!

are you still on sequoia? or are you using Tahoe?

if on Tahoe, please see cierrabrooke's reply.

but if on sequoia, you do have a couple options.

the first option, you can lay a new sequoia install over the old one without completely erasing and reinstalling sequoia. afterwards, you will have sequoia with safari 18.6.

and the other option, you may want to look at 6x6's reply in this discussion. if you are comfortable using terminal, their suggestion fixes things for those of us on sequoia with safari 26.0.1.

you're welcome. :)