Hi Rohit, I've almost the same setup here and delete does support nested filesets without any problems. I'd bet that there is an older version of Ant lingering in your CLASSPATH and this one gets called instead of the version you expect.
What does "ant -version" say? Likely candidates are the lib directories of various other projects that ship with their own versions of Ant - and dont forget to check JAVA_HOME/jre/lib/ext. Stefan
