I am not sure how you are doing this but the idea would be to first ray cast against the root node (whatever shape that may be), if it hits then you cast against any objects contained with in and store any hits. You then cast against any child nodes, the shape of those shouldn't matter as long as you can ray cast against it. If you hit any then you ray cast against any objects in those. You then ray cast against the child nodes of those and so on until you you run out of nodes to check. You then will have a list of objects that were hit (if any) and you just select the closest one.

There are some opportunities for optimisation there, firstly if the ray always originates in the root node then you don't need to do that check. You could probably do something with culling siblings if you have already found a hit that is closer than another sibling could provide.

If you are missing nodes out then I would think there's an issue with your ray-volume check and you should check there especially as you are merging some of those siblings which could throw up some difficulties

When you do your checks do you have it hard coded that (1, 0, 0) would go east and have the east node already selected rather than going down the tree in turn?