Hi Rachel,
In WP you can go to Discussion Settings > Other comment settings > check the box for 'Enable threaded (nested) comments X levels deep' (where X is how many nested comments you want to allow).
Since version 2.7 and up has the above, you shouldn't need the following, but posting them just in case you want to try something else:
You might try the
WordPress Thread Comment. Just make sure to do a backup first. It is compatible up to version 2.7.1 of WP, but most likely will work with higher versions. (Here's the
developer's page on this - has screenshots.)
Or...
Quote Comments. This adds a quote feature, but not sure if this is what you are looking for.
HTH a bit,