The problem exhibited is not coming from the os.walk() implementation, but from the use of a byte-string as the argument to it.

The directories are created with unicode literals and therefore the argument must also be a unicode literal (u'.') for them to be shown.  See the note in the listdir() documentation.

As it stands, I suggest that this is closed as invalid, or at the minimum that it could be a documentation bug for walk() not also having a similar note as listdir().