Hacked on kuatia for a couple of hours...
As mentioned previously, I am hacking a bit on a proof-of-concept word processor. Right now, it's hosted on googlecode and called kuatia.
Now, it is far from being useful for anything, but... it can do nested itemized and bulleted lists.
Here's a screenie of the editor and the PDF output it produces via reStructured Text:
Personally I think that's not too bad.
this is really interesting viewpoint on the subject i might add