I have an example of three layers of nested droppables. Taking the 'middle' droppable (which is also a draggable) and dropping it on the 'outer' droppable causes the 'inst has no properties' error.

Here is the example: http://build.fluidproject.org/sakai-imagegallery-tool/tests/fluid-tests/manual/jQueryDnD/nested.html

To replicate the error pick up 'Outer Item 1' and drop it on 'Container'.

To give some context to the markup, I have a portal with reorderable portlets. The portlets are in columns which are droppables. One of the portlets contains an image gallery with reorderable thumbnails. You can see a mockup of this here:

http://build.fluidproject.org/sakai-imagegallery-tool/sample-code/reorderer/portal/portalWithAvatarClone.html

Picking up the 'Image Lightbox' portlet (by grabbing the title bar) and dropping it back where it was (on the red drop marker) causes the error.