This issue was solved with the release of 6.5.8 https://experienceleague.adobe.com/docs/experience-manager-65/release-notes/service-pack/sp-release-notes.html?lang=en#service-pack

@arunpatidarI used the AEMaaCS project you listed and I am still seeing the issue where it does not create nested lists but only adds margin. Do you know what could be causing this?