You cannot imbed Portlets inside Portlets. Just multiple Portlets on a Portal page. It all comes down to the Portal vendor implementation. How can the Portal do the necessary Session tracking, Window state and Mode checking of a Portlet inside of another Portlet. It just isn't in the spec. So if a vendor does allow this, then you are vendor locking yourself.
Yeah we can display more than one portlets in a single portlet application. In a Portal page there are multiple portlet applications will be placed.Each portlet application can have one or more portlets.