It doesn't appear possible to do something like
VLC folder/ folder2/ from the command line. Instead I've successfully created an Automator service that generates a playlist and launches the application passing the list to it.
Here is the service...
To include subfolders enable the option
Repeat for each subfolder found in the first action shown above.
To save you the typing, the shell script code is as follows,
# Create playlist
cat > $PLSFILE
# If file empty just exit
[ -s $PLSFILE ] || exit 0
# Launch VLC with our new playlist
open -a /Applications/VLC.app/Contents/MacOS/VLC $PLSFILE --args --playlist-autostart
The shell script will do nothing if Finder doesn't find any media files. If VLC is already playing, it will add the files to is existing list. Check the VLC documentation for more information on available options.
Finally you can launch it by right clicking on a folder and then select Services...
Hope that helped.