C#

<div id="divLoader" style="display:none;"><img alt="loading..." src="/images/loader.gif"/></div>
<asp:DropDownList ID="DropDownList1" runat="server" onclick="ShowHideLoader($('#divLoader'));">
</asp:DropDownList>

function ShowHideLoader( divLoader )
{
   if($( divLoader ).is(':visible'))
      $( divLoader ).hide();
   //or
   //$( divLoader ).css({display: 'none'});
   else
      $( divLoader ).show();
   //or
   //$( divLoader ).css({display: 'block'});

}

1. They have been dereferenced, but the GC hasn't got around to picking them up yet. If your machine is not running short on memory, the .Net GC is very relaxed about bothering to reclaim unused memory. There's not much you can do about this, but you can put a button on your form that calls GC.Collect for memory checking purposes only and see if the view models get collected (you can give them a destructor that echoes to the console, again for debugging only, to find out).
   
2. You're saving a reference to those view models somewhere. The obvious place is the tree view itself – are you putting a reference to the view model (or to a view class which is tied to the view model) into the Tag property of tree nodes which you never clear? Is the database loading process attaching event handlers which keep references to the view models alive?