Well, duh.
This isn't exceptional for this environment; it's a obvious consequence of running with too many privileges. Normal users should never have more than class G, which does not include the ability to halt the real machine. Running something like this in a privileged machine is proof of nothing more than you are an idiot.
Wrt to VM-inside-VM virtualization, it is possible with VM to run arbitrary numbers of layers. I personally have exeeded 45 layers deep. After the 3rd layer you lose most of the hardware assists, so it gets dog slow, but if you have enough RAM and disk, you can go as far as you can stand.
Not bad for something released in 1964.