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It is not possible to nest elements in the designer if another type of element is present inside. It is easier to explain with an example so here it goes:
Take a RelativeLayout and drag it onto the phone. Drag another one and put it into the previous RelativeLayout. This works great.
However if you take a RelativeLayout, drag a Button into it, then want to drag a new RelativeLayout inside the previous RelativeLayout, it just pops either above or below the first RelativeLayout.