I have now had a site where SiteTree::enable_nested_urls(); does not seem to work... that is, it works fine, but once I have turned it on, I dont seem to be able to save pages in the CMS anymore. When I removed "SiteTree::enable_nested_urls(); "from the _config file, the pages save again...
A few days ago, I raised a ticket: http://open.silverstripe.org/ticket/6670 - which is slightly different, but I wonder if the two are related?
As to your ticket - I agree, a possibly endless loop is a hazard :-) Just wondering about the static within the decorator: should that be added using the extraStatics() method or am I totally wrong? I don't really know what the internal difference is - but maybe it's worth a try?
For the current site having a problem - is it a new SS install? Do other sites on that server react the same?