Since the topic seems to be a popular one, I thought I'd take the time to give a fairly deep insight on the commenting system and its intricacies. I'll try not to speak too much geek, but I can't really make that a promise.
There are three major components that dictate how comments are displayed. These are: threaded / flat, expanded / collapsed, and date order. You'll have to trust me when I say that under no circumstances do you want a collapsed system, so there's effectively only two options to play with.
The system works by constructing a comment tree according to the structure option and then ordering each comment's children by the date order option. A flat structure is pretty self-descriptive; all comments are aligned to the left of the site's content area and show up in one contiguous column. The vast majority of the internet is structured around a flat commenting system, so I'm sure you've seen them around. Threaded structure is what this site is currently using. Comments are recursively grouped under their parent and are graphically noted (usually with indentation) as being child comments. A threaded commenting structure makes it very easy to explore side-discussions, which can be either good or bad depending on whom you ask. The closest a flat commenting system can come to this functionality is the use of quoting. The only site I know of that has developed a robust threaded commenting system is reddit (fair warning - that link is hostile territory for most of you). I would be beyond ecstatic if we managed to make threaded commenting work that well here.
That said, threaded comments have several obstacles to overcome and/or accept that flat comments do not have to deal with. First and foremost is the phenomenon I call "driving the bus off the cliff." This is when the comment tree's depth has become so great that the comments run out of space and begin to break the site layout. (Example) Also, due to the way comments are stored, the exact structure of the tree isn't known until after the tree has been built. This is the cause of the annoying comment links that take you to the story / forum page instead of directly to the comment. Since the structure isn't known ahead of time, it is exceedingly difficult to determine the comment's place in the paging system. To put that in perspective, it took the open source community 6 years to find a solution, and due to issues with prerequisites, the solution can only be implemented in the next major version update of the site's software (meaning we're SOL for the moment).
After the comment tree has been been built (regardless of whether it's flat or threaded), each comment's children are ordered by date. This can be either oldest-to-newest or vice versa. This site actually uses both date orders depending on the type of content in question. Comments on forums are oldest-to-newest, and comments anywhere else are newest-to-oldest. I know this might be confusing, but it's fairly standard that comments on news articles are newest-first, and it's set in stone that forum comments are oldest-first.
It might be possible to develop some sort of hybrid solution, whereby you could only reply to a certain comment a limited number of times (maybe even only once). This solves the actual display problems with threading, but not the problems inherent with building the structure and linking to arbitrary comments.
TL;DR - It's complicated and there is no optimal solution. =\