Short answer: Yes . ReportViewer can behave as you describe. (Your colleague is wrong.)
There are several approaches for displaying all rows in a data source, not just the first one. I am most familiar with the List Control approach, which is described here, but there is also a Master-Detail approach, using either nested data or nested data regions.
Strictly speaking, this question is about displaying multiple rows of data, not collections of user objects. You might want to change the title of the question from ".NET ReportViewer Features: Binding to Custom Object Collections"? say ".NET ReportViewer Features: Displaying Multiple Rows"?
When developing a report, if you put a field from the data source in the report designer and display the report, you notice that only one row is displayed, and not the entire data set. Upon closer inspection, ReportDesigner wrapped the First () aggregate function around your data field. This is the default behavior for ReportViewer.
What you want to do is use the List control and put your data controls in it. Now all rows of fields will be shown. It is so simple.
A list is an essential component to using ReportViewer successfully. Read it. A list can handle greater complexity using the capabilities of Group Expression, as well as by placing List / Table controls on it.
Resources
As mentioned in another post, one of the best web resources for ReportViewer is the GotReportViewer site. There you will find additional information about using List, Master-Detail, and others.
Good luck.
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