Index: ui.droppable.js
===================================================================
--- ui.droppable.js	(revision 5107)
+++ ui.droppable.js	(working copy)
@@ -112,7 +112,7 @@
 			if (!draggable || (draggable.currentItem || draggable.element)[0] == this.element[0]) return; // Bail if draggable and droppable are same element
 			
 			var childrenIntersection = false;
-			this.element.children(".ui-droppable").each(function() {
+			this.element.find(".ui-droppable").each(function() {
 				var inst = $.data(this, 'droppable');
 				if(inst.options.greedy && $.ui.intersect(draggable, { item: inst, offset: inst.element.offset() }, inst.options.tolerance)) childrenIntersection = true;
 			});
@@ -220,12 +220,27 @@
 			//Run through all droppables and check their positions based on specific tolerance options
 			$.each($.ui.ddmanager.droppables, function() {
 
-				if(this.item.disabled) return; 
+				if(this.item.disabled || this.greedyChild) return; 
 				var intersects = $.ui.intersect(draggable, this, this.item.options.tolerance);
 
 				var c = !intersects && this.over == 1 ? 'out' : (intersects && this.over == 0 ? 'over' : null);
 				if(!c) return;
-					
+				
+				var instance = $.data(this.item.element[0], 'droppable');
+				if (instance.options.greedy) {
+					this.item.element.parents('.ui-droppable').each(function() {
+						var parent = this;
+						$.each($.ui.ddmanager.droppables, function() {
+							if (this.item.element[0] != parent) return;
+							this[c] = 0;
+							this[c == 'out' ? 'over' : 'out'] = 1;
+							this.greedyChild = (c == 'over' ? 1 : 0);
+							this.item[c == 'out' ? 'over' : 'out'].call(this.item, e);
+							return false;
+						});
+					});
+				}
+				
 				this[c] = 1; this[c == 'out' ? 'over' : 'out'] = 0;
 				this.item[c].call(this.item, e);