It appears that a subflow cannot call another subflow.

Why is this?

There's nothing done in a subflow that couldn't be done in a custom function, and a subflow can perform a custom function.

I realize that if things get nested too deep that could affect performance, but again, the same thing could happen with custom functions.

I suspect that you're trying to prevent edge case failures, but you're throwing out the baby with the bathwater. The vast majority of the time that there would be nested subflows, they're still likely to be fairly simple. The main use case for the subflow is to have one process that can be called in multiple automations and maintained in one place.

Please consider removing this restriction.