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Thanks for the info Lance. I've done some further digging and our problem is similar to yours - if a group is in more than one of the nested groups then it errors - if all the nested groups are unique then it seems to be fine. This is tested on 8.5.1 so I will be testing on 8.5.3 when I can. I'm the only user in all the groups so for 8.5.1 at least it doesn't seem to be when the user is in several of the groups.
Feedback response number WEBB8MQJAM created by ~Richard Eknisonjip on 10/17/2011