Yes... it is possible to nest lists many levels deep.
Here is our list of lists:
Try to change the following HTML to create that list:
This may take a couple of trys. To speed things up, use "copy" and "paste" from the browser edit menu to manipulate the text in the box. Then click to see what the HTML does.
After you get it working, delete one of the inner </ul> tags and notice the effect.