Yesterday I was discussing this in on G+, which lead me to conclude this is actually a bug (or, at least, a very good improvement).
When you run push --recurse-submodules=on-demand, according to the push manpage you would expect any submodule commit missing on it's default remote to be pushed aswell. But this only works for the submodules of the repo you run it in, it does not work in nested submodules (hence not being recursive at all).
I could (with my very little understanding of C) confirm this in the source code, and the boils down to the function push_submodule on file transport.c explicitly calling push without any params, where I would expect it to call with --recurse-submodules=on-demand when done so on the parent repo (and then it will actually be trully recursive).
Any thoughts?