haml-mode, 3.0.5 under emacs 23.3.1.

Indentation only works up to 5 nested tags, if the nesting is greater
than 5, indenting via TAB
inserts a literal tab:

%x
  %x
    %x
      %x
        %x
          this is indented with a tab...

tab-alway-indent is true.

haml-mode 1.0 has a similar problem, but only when using haml-output-
buffer. The underlying HAML file is not affected.
A diff of 1.0/3.0.5 indicate no change to haml-indent-line or how it's
bound to indent-line-function.

Has anyone else experienced this?

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