It is possible to achieve what you want without too much fiddling if you can put the inner list in a minipage (hence, not compatible with page breaks). And it is also possible with a bit of fiddling to do it without this restriction of no page break. First method:
\documentclass{article}
\usepackage[body={20em,100ex}]{geometry}
\newcommand{\abc}{\makebox[1em][l]{\rule{.9em}{1ex}}\allowbreak}
\newcommand{\abcd}{\abc\abc\abc\abc\abc}
\newcommand{\abcde}{\abcd\abcd\abcd\abcd\abcd}
\begin{document}
\noindent\abcde\par
%% testing the \abc building block: 20 times 1em = 20em
%% \noindent\rule{\linewidth}{1ex}\par
%% \noindent------------------------------------%
%% -----------------------------------\par
\begin{list}{$\bullet$}{%
\setlength{\labelwidth}{1em}%
\setlength{\labelsep}{1em}%
\setlength{\leftmargin}{2em}%
\setlength{\itemindent}{2em}}
\item \abcde\par\abcde
\item\begin{minipage}[t]{\dimexpr\linewidth-\itemindent}
\begin{list}{\ddag}{%
\setlength{\labelsep}{1em}%
\setlength{\labelwidth}{1em}%
\setlength{\leftmargin}{0em}% note the 0em here and the stuff below
\setlength{\itemindent}{\dimexpr\labelsep+\labelwidth}}
\item\abcde\par\abcde
\item\abcde
\end{list}
\end{minipage}
\item hello
\end{list}
\end{document}
Please note how I modified your \abc macro. Because, as I have encountered also on another occasion, and do not understand why, the \kern.05em\allowbreak from your original code leads to one box too many, which goes into the right margin. Whereas my method here does not. Anyway this code produces:

The second method is :
\documentclass{article}
\usepackage[body={20em,100ex}]{geometry}
\newcommand{\abc}{\makebox[1em][l]{\rule{.9em}{1ex}}\allowbreak}
\newcommand{\abcd}{\abc\abc\abc\abc\abc}
\newcommand{\abcde}{\abcd\abcd\abcd\abcd\abcd}
\begin{document}
\noindent\abcde
\newdimen\mydimen
\begin{list}{$\bullet$}{%
\setlength{\labelwidth}{1em}%
\setlength{\labelsep}{1em}%
\setlength{\leftmargin}{2em}%
\setlength{\itemindent}{2em}}
\item \abcde
\item \setlength{\mydimen}{\itemindent}%
\begin{list}{\ddag}{%
\setlength{\labelsep}{1em}%
\setlength{\labelwidth}{1em}%
\setlength{\leftmargin}{\mydimen}%
\setlength{\itemindent}{\dimexpr\labelsep+\labelwidth}}
\item[]\hskip-\mydimen\hskip-\labelsep\llap{\ddag}\hskip\labelsep
\abcde
\item\abcde
\end{list}
\item hello
\end{list}
\end{document}