Back in MOSS 2007, it was not possible to nest SharePoint groups. What was unnerving is that the GUI would even allow you to select groups. Only to throw an error when attempting to save your action.

SharePoint 2010 is going to handle this differently. sp2010 still does not allow nested SharePoint groups, but this time around it will not even allow the selection of SharePoint groups. This is a good advancement in usability and keeps that annoying error message from being displayed.

Microsoft is still working out some kinks with this new validation in Beta 1, but should be up and running smoothly with the next release.