You are wanting "nested" drop-downs.
I've done this many times, I've never known it to break. At least for me. But I suppose your mileage may vary. LOL
Years ago I created a form where folks typed a vacation request. I needed to allow them to type up to a total of five date pairs I believe. So I nested them about five deep and created text that said "Add another pair" that revealed each subsequent pairing of dates. Worked pretty slick.
For the instance that Rick describes and in other instances where it makes sense, go for it!
If you are writing software documentation, don't make the only place you have a term that users may be looking for be available within an expand section. My experience is that unless you have an "Expand All" link - see Peter Grainge's site for the way to do that - you are making the user open every expand / collapse section to find what they want.
I went through that frustration when I worked with a help system at a previous employer. The word "jetty" was a term that users were likely look for in this help system and it was only in an expand / collapse section on a single page. It was not in the body of the page. What frustrated me, as a user, was if I searched the "entire" help system for "jetty," it would take me to the correct page. However, doing a page-level on that page would yield no results for "jetty" because it was only in the expand/collapse section. I had to expand a section, repeat the page-level search for the word, and if it wasn't found, repeat that process for the entire page. This specific page still exists and the word "jetty" is first found in the 4th of 19 collapse/expand sections; in all, the term "jetty" is included in 3 of 19 expand / collapse sections, including the 19th. So, in order to find all instances of that word, you have to expand 19 expand/collapse sections.
If it makes sense, as it does in Rick's example, it's a great technique for layering content.