But the query that you pasted is just simply give the first non null value as the coalesce does and give output as 'NULLFail'.... 😛 (no tricks in it)
today's QOD is little tricky to make confusion between null and 'NULL'
I am not sure about your statement regarding nesting of coalesce but I think we can do that...
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http://www.sqlservercentral.com/articles/Best+Practices/61537/