I created a Visual Studio SharePoint project that has a custom list in it. When I deployed the solution, the list instance is created for only the root site and not for subsites. The feature scope is "Site". Is there is a way to create list instance for all the sites and subsites in a site collection using this approach? I understand that this can be done by custom code, but I want to check if its possible by using default options.
The list instance was created on the site on which you activated the feature.
Your list should be in a web-scoped feature. Site-scoped features are for site scoped things like master pages, content types and web parts. They will not cause web-scoped things like lists to become automatically provisioned on subwebs. This means every subsite you want the list to appear on needs to have the feature activated.