Virtualization: Guest in guest?
Its possible, read more here - http://blog.jasonruiz.com/2011/01/24/kvm-nested-virtualization-support/
the current purpose of nested virt is testing, but I think it meant to test hypervisors not databases, dns, etc...
in order to test such services I think "normal" virtualization will do.
you can have a few different virtual networks, with different dhcp/dns/routing services.
What you want to do is possible, it's just not really practical from a performance point of view.
ESXi can virtualize itself. So you can run ESXi as a guest on ESXi (or ESX for that matter).
Directions found here
I don't know about other hypervisors, but it's definitely possible with ESX/i, as discussed here. Also, it's definitely not possible with Hyper-V, as discussed here.
Howewer, where this is possibile, it's totally unsupported and also quite useless, unless for testing purposes. I personally did it with ESX to test a VMware cluster, which required at least two ESX hosts, a Virtual Center machine and some shared storage; I didn't have more than one server nor any "real" storage available at that point, so I used virtual ESX hosts with a shared virtual disk (just like I would have done to test a Microsoft cluster). It worked, and it was also not terribly bad at performance. But I can't think of any reason in the world to use this kind of setup in a production environment.