For any setting related to K2 there is just no simple answer. It is very powerfull and hence pretty tough beast to tame.
K2 Category blog view has three distinctive areas:
- Root category block with it's title, image, description
- Sub-categories block, with their titles, images and descriptions
- Items block, with items belonging to either root category and/or sub-categories, with their atributes. Items display depends on settings chosen in both main category and sub-categories.
But there is no setting which will enable you to mix blocks 2 and 3, which is what you want, if I understand your question correctly.
Only way I can see your problem might be solved is to create specific K2 category view layout override, but that might turn out to be pretty messy. I for one would have to scratch my head pretty badhard to achieve it.