If you edit a chat message to quote itself (replace itself with it's own permalink), then update it using up-enter a few times, it will expand that chat window with nested quotes and ruin formatting.
As a nice side-effect, whenever you type a message, it will pan right to cut off the user names, then when other people type messages it will go back to the left, as though running from an alligator (or perhaps just drunk).
Back to serious business, is there any reason to quote a quote? With the system you can't add anything to it or emphasize a given part, so the middle man is essentially irrelevant. I propose just 'simplifying' nested quotes back to the original message.