We have our AD server set to read only w/ local groups. Our local directory is set up to support nested groups, and when we add users from the local directory to the sub-group, they're added to the parent groups as normal.
Unfortunately the users in our AD server don't get added to the same parent groups, they only get added to the group that you add them to.
For fun, even though our AD server isn't working our groups, we have it set to supprt nested groups as well, but that didn't change anything.